At What Age Can You Start Investing in Stocks in the UK?

The majority of brokers, investment bankers, and other financial experts recommend investing as soon as possible to take advantage of your earnings to generate additional funds. 

But at what age can you invest in stocks in the UK, and where do you invest first?

Find the answers to these questions and more in the sections below!

When Can You Start Investing in the UK?

To legally invest in your name in the UK, you must be at least 18 years of age. However, investing for kids is also an option that parents and legal guardians can utilise by opening a Junior ISA or an account in their own name meant for the child.

Depending on the type of savings account you open, the funds may be locked until the minor’s 18th birthday, at which point they get full control of the investment portfolio.

Where to Invest First?

So you’ve decided to build up a nest egg for yourself or your children but have no idea where to start? Well, before we explore the various options available to budding investors, such as buying shares for a child in the UK, consider the following:

• Conduct proper research—the stock market is volatile, and investment trends change regularly, so do thorough research before investing your hard-earned money;
• Visit various investment platforms—these online financial ‘supermarkets’ allow you to peruse various investment opportunities in one place;
• Set your financial goals—plan your savings goals, such as paying for a house, car, your child’s education, etc., in order to choose the best investment strategy;
• Settle your debts—any outstanding debts that suck up your cash flow will hinder your financial freedom and savings plans;
• Remember that any investment is risky—investors are always undertaking a degree of risk and the chance that they might not see any earnings even with money market funds;
• Choose the right risk-to-reward ratio—if you are looking for a short-term return, you should go for riskier yet potentially more profitable investments;
• Diversify, diversify, diversify—reduce your overall risk exposure and ensure steady growth by investing in a large variety of areas and products;
• Don’t panic when things are tough—when some of your investments are not doing well, you have to hold on instead of impulsively selling at a loss;
• Start as soon as possible—the sooner you start investing, the less you have to put in later, as your earnings will start generating profits themselves.

Typically, you can invest in all kinds of financial products and other goods, such as funds, stocks, shares, bonds, or other valuable commodities like gold, vintage cars, art, etc.

As a young investor, however, your best choice is passive index funds as they do not require a lot of maintenance, are already diversified, and carry low risk.

Why Invest as Soon as Possible?

By investing early, you take advantage of the magic of ‘compounding’ i.e. the process of your assets generating earnings that are subsequently reinvested to produce their own funds. So the sooner you start, the faster your money will grow exponentially.

You can also consult with a junior stock broker to understand the risks and benefits of investing, review your finances, settle old debts, and choose a suitable investment option.

So even if you start with a modest sum, compounding will help your portfolio grow at a steady rate, so you will catch up to investors that have started later with larger investments.

Investing With Junior ISAs

To ensure a better future for your children, you can invest in either a junior stocks and shares ISA or a cash ISA with any number of UK financial institutions. We explore both below.

Junior Stocks & Shares ISAs

If you are looking to invest in stocks for your kids, opening a junior stocks and shares ISA is your best option as it offers a tax-efficient and lower-risk investment portfolio with access to thousands of funds, trusts, and bonds, and both UK and overseas shares.

Typically, your child can have only one junior ISA in their name, and they would be able to withdraw funds from it once they turn 18 years of age. At such a time, the account would be converted into a standard stocks and shares ISA, and would be free from any tax.

Note: For the 2022/2023 tax year, junior ISA account holders (even their friends and family) can invest up to £9,000 in total, and the deadline is midnight 5 April.

Junior Cash ISAs

Like stocks and shares ISAs, you don’t have to worry about any UK income and capital gains tax with cash accounts. Also, cash ISAs are very similar to standard savings accounts, where you get secure and regular interest, and you can save up to £20,000 per year in cash.

If you open a cash ISA in addition to a stocks and shares account, you’ll have to split your yearly allowance of £20,000 between both ISAs. On the other hand, if you want to add or withdraw money, you can do so via your debit card or another savings account.

How to Open a Junior ISA in the UK

Before applying for a junior cash or stocks and shares ISA, ensure you meet several requirements:

• You and your child are UK residents;
• Your child is younger than 18 years of age;
• You have not yet opened a Child Trust Fund or Junior ISA elsewhere;
• You are not surpassing the maximum investment amount;
• You can provide a debit card and a national insurance number;
• You submit the minimum deposit (may vary between banks).

If you meet the above criteria, you can finalize the procedure in as little as five minutes. Simply visit your preferred financial institution, bring the needed documents, and fill in and sign a few papers.

Note: Your annual ISA account fees will vary depending on the institution you choose and the types of investments you choose.

Before Putting Your Money on the Line

Albeit risky, investing in stocks can be a great way to grow your wealth over time. However, with the proper research and help from a financial advisor, you’ll be well on your way of reaching your financial goals and building a nest egg for your and your children’s future.