They may not be old enough to vote, but as of last Tuesday, 13 to 17 years olds can now open their very own brokerage accounts with Fidelity Investments Inc
Fidelity is billing the program as the very first investment and savings account designed specifically for teens. Account-holders will get their very own debit cards and will be able to use their savings to invest in a selected number of securities, including stocks and "most" exchange-traded funds (ETF). Parents will be able to track their kids' spending habits, but unlike in a custodial account, they won't directly control how their children spend their money.
"Fidelity is committed to responsibly supporting young investors," said Jennifer Samalis, Fidelity's senior VP of acquisitions and loyalty, stated in a press release. "Designed alongside teens and parents, the account is charting a new course by providing the ability for teens to build healthy money habits through learning by doing."
One thousand teens participated in Fidelity's pilot program last year. And it seems that most of them did indeed learn through doing. Although the program was limited in scope, the results showed that nearly half of all money in these accounts came from the teens themselves. 40% of participants used their debit cards to make purchases. Rather than buying stocks, it seems that most participants mainly used their accounts to track their spending habits.
Most importantly, 9 out of 10 parents said they used the opportunity as a "teaching moment" for their children. Because parents can't directly control their kids' spending habits through the app, they're forced to have conversations with their children. According to Fidelity, the program's participants now regularly hold conversations around the dinner table about the importance of investing and other financial topics.
Fidelity's move reflects a broader trend in the brokerage industry as a whole. In the past few years, commission fees have gone to zero, and investing apps now use slick, minimal interfaces to make buying and selling stocks as simple as swiping through Tinder
While Fidelity casts the program as an extension of its commitment to educating the next generation of investors, it's clear that the brokerage firm is also capitalizing on existing demand.
"There is a lack of financial literacy," Fidelity's chief marketing officer David Dintenfass told the AP. "People who are already Fidelity customers, they want to pass on their knowledge to their children. When we talked to them, they said they would love to have a product to develop better conversations with their children as soon as possible."
For Fidelity, the numbers then are simple. There are 27 million teens in the United States, and millions of their parents already have a Fidelity account, potentially translating into millions of lifelong customers for Fidelity.
"There's been more interest, so we expect demand might be high," Dintenfass told the Wall Street Journal.