From FinTechs To Fidelity, 13 Is The New 18 When It Comes To Investment Advice

Fidelity came to market with a new product targeted to hyper-young consumers (13 and up) and intended to help them get a really early jump on their careers as investors.

Called the Fidelity Youth Account, it is designed to allow young users to buy and sell most U.S. stocks, ETFs and Fidelity mutual funds. And it is, notably, an account genuinely pitched to young users — not as a proxy for parents to invest in their kids’ behalf. Parental oversight is part of the design; Mom and Dad can monitor their child’s account activity and set up notification alerts for trades, transactions and spending — but the action in the account is pitched squarely on its young users.

The power of these accounts, according to reports, is captured in the power of compounding interest. A 13-year-old a consumer who invests $100 and continues to contribute $100 a month will by age 67 will (assuming market patterns hold) via the magic of compounding see their investment account worth about $650,000, while a 23 year-old who started saving at the same pace 10 years later would have roughly $320,000 at retirement age according to CNBC’s math.

Teen interest in investing, data shows, expands beyond the traditional realm of the stock market, according to a Wells Fargo market survey published earlier this month which showed that a majority of teenagers (57 percent) still said they learned about handling finances from their parents. But, the survey showed, parents aren’t the only name in the game at this point — 47 percent report having learned about financial management from school, 35 percent named social media and 34 percent cited studying up online with websites and articles.

“There is a bit of a disconnection between parents’ and kids’ perceptions around financial education,” said Kathleen Malone, financial advisor with Wells Fargo Advisors in Charlotte, North Carolina, noting that while 61 percent of parents polled said they talk to their kids about finances, only 43 percent of teens said those conversations occurred. “It’s very important for families to discuss money — and for our next generation to understand how to handle their finances.”

The survey also noted that in some areas of financial management, teenagers increasingly believe they may in fact know more than their parents about prudent investing moves. Half of all parents reported that their teen knew more about bitcoin than they did, while 45 percent of teenagers reported the same.

“I think that Gen Z — we’re a little behind in terms of the financial aspect, but we’re not behind in terms of technology,” an 18-year old who goes by the online name “Miss Teen Crypto” said in an interview. “We’ve been on Snapchat since it came out. We’ve been on the internet our whole lives. So we know the concepts of digital property, we understand how to use this technology. We just have to be educated on why we should and how we could.”

And in fact teen interest in crypto investing has come up so swiftly and suddenly, the CFPB is now taking a closer look and questioning if it needs to step in and intervene on behalf of younger consumers stepping into the world of crypto investing.

But even if the CFPB takes a hard lie and puts the kibosh on crypto-trading for the young, it seems the good old-fashioned mainstream stock market will remain an open opportunity for younger investors looking to get an extreme jump on building a  retirement savings account — well in advance of getting their first full-time job.

The interesting question to be answered is how the market looks if the plan works and a legion of super-junior investors descend on the public markets to start trading in earnest. As the GameStop stock run of early 2021 demonstrated, ushering in a mass of new and unknown players into the stock market and setting them loose can have very hard to predict consequences in places one might not expect.

Which means what to expect as teenagers become the hottest class of investors the likes of Fidelity are looking to bring into the market is hard to forecast ahead of time — but will doubtless be interesting to watch as it unfolds.