Fidelity Youth is an app designed for teens aged 13 to 17 to learn about managing money through a teen-owned brokerage account.
Here’s a breakdown of its features:
Account ownership: The account belongs entirely to the teen, giving them control over saving, spending, and investing decisions.
Features:
- Investing: Teens can invest a portion of their money in stocks and other securities (inherently risky).
- Debit card: The account comes with a debit card for making purchases and withdrawing cash from ATMs (even globally with no fees reimbursed by Fidelity).
Adult supervision: While teens have control over the account, a parent or guardian with an existing Fidelity account can monitor activity, set up allowance deposits, and learn alongside their teen.
Fees: There are no fees for opening or maintaining the account, nor any minimum balance requirements. Even ATM fees are reimbursed globally.
Things to Consider About Fidelity Youth Account:
The Fidelity Youth account is not a joint account or a custodial account (like UGMA or UTMA) where a parent or guardian controls the funds until the teen reaches legal age.
Fidelity limits deposits to $30,000 per year in new funds.
And there is no trading of crypto. To quote their site: “Due to the increased level of risk associated with cryptocurrencies, Fidelity does not currently offer this option in our brokerage accounts, including the Fidelity Youth™ Account.”
Overall, the Fidelity Youth account offers a way for teens to learn about financial responsibility through hands-on experience with managing their own money.
How Long Has Fidelity Offered This Youth Account?
The Fidelity Youth Account was launched in 2021. It was designed to be the first brokerage account specifically made for teens. [Fidelity® Study Reveals Teens Think Investing is Important, but Fewer Than 1 in 4 Have Actually Started, newsroom.fidelity.com]
Fidelity Youth Account web page
What Makes it Unique?
There are two key aspects that make the Fidelity Youth Account unique:
Teen Ownership: Unlike custodial accounts (UGMA/UTMA) where a parent or guardian controls the money until the teen reaches legal age, the Fidelity Youth Account is truly owned by the teen. This allows them to make their own financial decisions (with the guidance of a parent/guardian if desired).
No Minimum Balance Requirement: Many traditional brokerage accounts require a minimum deposit to open and maintain the account. The Fidelity Youth Account eliminates this barrier by having no minimum balance requirement, making it accessible for teens with any amount of money to save or invest.
High Cash Yield
Cash sitting in the account is “swept” into a high yielding money market fund. To quote: “We take your teen’s uninvested cash and automatically put it into a money market fund that can now earn 4.96%. [Fidelity® Government Money Market Fund (SPAXX*) 7-day yield as of February 29, 2024; the yield may vary owing to market conditions.]”
How different from a Custodial Account?
The key differences between a Fidelity Youth Account and a custodial account lie in ownership and control of the funds:
Ownership:
Fidelity Youth Account: The teen owns the account. This means the money in the account legally belongs to them.
Custodial Account (UGMA/UTMA): A parent or guardian acts as the custodian and holds the account on behalf of the minor. Ownership of the funds transfers to the minor when they reach the legal age (which varies by state).
Control over Funds:
Fidelity Youth Account: The teen has control over making investment decisions and managing the debit card. Parents can monitor activity but cannot directly control the funds.
Custodial Account (UGMA/UTMA): The custodian controls the investments and manages the account until the minor reaches legal age.
Here’s a table summarizing the key differences:
| Feature | Fidelity Youth | Custodial (UGMA/UTMA) |
| Account Ownership | Teenager | Parent/Guardian (as custodian) |
| Control Funds | Teenager | Parent/Guardian (until legal age) |
| Investment Decisions | Teenager | Parent/Guardian (until legal age) |
In essence, a Fidelity Youth Account provides teens with a platform to learn about financial responsibility through practical experience, while a custodial account prioritizes control by the parent or guardian until the child reaches adulthood.
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Fidelity Youth vs. Robinhood and Acorn
Here’s a comparison of Fidelity Youth Account with Robinhood and Acorns, focusing on features relevant to young investors:
Account Type:
Fidelity Youth: Teen-specific brokerage account with debit card.
Robinhood: General brokerage account (no age restrictions, but not recommended for unsupervised teens due to lack of educational features and potential for risky behavior).
Acorns: Micro-investing app with a retirement account option (also not specifically designed for teens).
Investment Features:
Fidelity Youth: Allows investing in stocks and ETFs (inherently risky). Provides some educational resources.
Robinhood: Offers commission-free stock, ETF, and options trading (options are a complex financial instrument and not suitable for beginners). Limited educational resources.
Acorns: Focuses on automatic micro-investing through round-ups and recurring deposits. Offers some educational content.
Supervision:
Fidelity Youth: Requires adult supervision with an existing Fidelity account. Adult can monitor activity and set up allowance deposits.
Robinhood: No built-in parental controls.
Acorns: No built-in parental controls.
Minimum Deposit:
Fidelity Youth: No minimum deposit required.
Robinhood: No minimum deposit required.
Acorns: Requires a minimum of $5 to start investing.
Other Considerations:
Fidelity Youth: Focuses on learning and responsible money management with a debit card for everyday purchases.
Robinhood: Geared towards active, independent traders. May not be suitable for beginners due to lack of educational tools and potential for risky behavior.
Acorns: Ideal for hands-off, automated investing with small deposits. May not be the best choice for teens who want to learn actively about investing.
Overall:
Fidelity Youth is the most suitable option for teens due to its educational resources, parental supervision, debit card for responsible spending, and focus on learning about investing.
Robinhood and Acorns are not specifically designed for teens and lack the educational and supervision features that Fidelity Youth offers.
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Downside to the Fidelity Youth Account
The Fidelity Youth Account, while innovative for its teen focus, has attracted some criticism. Here are the main points:
Limited Investment Options: Compared to a standard brokerage account, Fidelity Youth offers a restricted selection of investments. Teens can only trade stocks, ETFs, and Fidelity mutual funds, excluding options and other complex financial instruments.
Debit Card Access: The debit card that comes with the account can potentially lead to irresponsible spending habits if not properly monitored by the parent/guardian. Teens might not grasp the full implications of investing versus spending, and easy access to cash could lead to impulsive decisions.
Lacks Advanced Features: The account caters to beginners and lacks some features that experienced young investors might be looking for, such as advanced charting tools or margin investing (borrowing money to invest).
Overall, the Fidelity Youth Account is a valuable tool for teens to learn about financial responsibility, but it’s important to be aware of these limitations before opening an account.
