Casual Investing for Teens (Ages 13-17)

• One-fund portfolio: The first earned income, such as a summer or part-time job, opens the door to a custodial Roth IRA, and one broad fund inside it is a common way to keep a teenager's first retirement account manageable. Common mistake: Funding a custodial Roth IRA with gift money for a teen who earned less than the contribution, since the amount cannot exceed the teen's own earned income for that year.
• 30 minutes a year: Once a teen has a paycheck, the monthly check gains one real task: matching deposits to the custodial Roth IRA against pay stubs. Common mistake: Making irregular Roth contributions that add up to more than the year's earned income because nobody totaled the deposits against pay each month.
• Automatic contributions: The first paycheck changes what automation can do. Common mistake: Scheduling a fixed monthly dollar transfer sized to a summer paycheck, then watching it fail or overdraw the bank account during the school year when hours and pay drop.
• Simple portfolio: The first paycheck changes the container. Common mistake: Believing a teen can put the full IRA limit into a custodial Roth regardless of pay, when the contribution cannot exceed the teen's own earned income for the year.
• Review once a year: Once a teen has a job, the annual review gains a concrete question: how much was earned, and how much of it went into a custodial Roth IRA. Common mistake: Making the Roth IRA contribution without keeping documentation of the earnings, which leaves no proof that the amount stayed within earned income if the account is ever questioned.
• Avoid overtrading: Teens meet trading apps with confetti animations and fractional shares, which make small, frequent trades feel costless. Common mistake: Using a small first account to trade often because losses feel cheap, and so absorbing the habit of frequent action before the balance is large enough to make that habit costly.

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