Teenagers Are Playing Their Financial savings on GameStop Inventory. Their Mother and father Are Anxious.

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Jake Schlein began investing when he was 14 years old with the help of a $10,000 gift and a custodial account opened by his father.

He started out playing it safe—sticking to well-established companies like Apple Inc. and Amazon.com Inc.

Jake bought 33 shares at $87 a piece last month after he and his friends saw the hype on

Twitter,

Discord and Reddit’s notorious WallStreetBets forum. After a wild ride that sent the shares soaring as high as $483 on Jan. 28, GameStop closed Thursday at $53.50.

The now 16-year-old says he has no intention of selling the stock anytime soon—even though his father, a former

Citigroup Inc.

executive and longtime financial professional, has suggested he cash out.

Jake Schlein, left, began investing when he was 14 years old with the help of a $10,000 gift and a custodial account opened by his father Michael Schlein, right. Jake bought 33 shares of GameStop Corp. at $87 a piece last month.



Photo:

Amy Lombard for The Wall Street Journal

“The stock price hardly matters right now,” said Jake, who like many other investors, hasn’t been deterred by GameStop’s recent volatility. “I’m definitely riding with it.”

The day-trading frenzy that has fired up stocks like GameStop, started a de facto war between hedge funds and Reddit traders and galvanized securities regulators is benefitting from capital provided by a growing number of young investors. Many of them are trying their hands at trading for the first time. And they have an entirely different viewpoint on the markets than their parents, for whom investing has often looked more like contributing to a 401(k) account, not diving into the trade du jour on social media.

“He actually thinks he’s making history,” said Linda O’Flanagan, a New Jersey resident whose 16-year-old son sold the entirety of his modest holdings last month so he could buy a single GameStop share and join the frenzy. “I said, ‘Don’t be silly,’ but what do I know?”

Rarely has trading stocks looked this fun.

Ms. O’Flanagan’s son, Connor, keeps GameStop’s stock price up on a second screen so he can keep track of its movement while answering questions in online classes. He swears he even saw his math teacher sneak a look at GameStop’s stock price at one point in class.

“It’s cool how the internet came together… and it could just overthrow Wall Street,” Connor said. He only intends to hold GameStop for a short while. “It’s basically a ticking time bomb,” he said of the stock’s rally. His plans for any profit he comes out with? Put that money straight back into the market.

Ms. O’Flanagan has other dreams. “Hopefully he makes enough money to pay for college. What a load off!” she joked.

‘The Fed just did what?’

It is no accident that teenagers like Jake and Connor had the chance to jump in on the GameStop mania. This generation has grown up in an era where trading has become as accessible as ever to the masses thanks to the rise of no-commission trading, the ability to purchase slivers of traditional shares for as little as $1 and the proliferation of free trading apps like Robinhood. The median age of users on Robinhood last year was 31, far younger than older rival Schwab’s average of 52.

Jake Schlein monitors his investments on one screen and does his school work on the other. He doesn’t intend to sell his GameStop stake anytime soon even though his father suggested he cash out.



Photo:

Amy Lombard for The Wall Street Journal

Zachary Cox, a 12-year-old from the U.K., only had 40 pounds ($55) to play with when he convinced his mom to open a custodial account for him last year on the British platform Trading 212.

He’s invested in everything from U.K. stocks to payment company Square Inc. and electric car maker

Fisker Inc.

He even put a tiny sliver of his portfolio—less than 1% of it—into

AMC Entertainment Holdings Inc.

after seeing the hype around the stock take off.

So far, it has paid off: Zachary’s portfolio has more than doubled in the eight months since he started trading.

“By the time I’m 18, maybe I’ll have enough money to pay to go to university,” he said.

Social media is another tool that puts trading within reach of more young investors. Online communities and platforms like Reddit’s WallStreetBets, Discord, Twitter and even TikTok have exploded with posts from users sharing everything from their latest portfolio recommendations to screenshots of their eye-watering losses. They have made the stock market hard to ignore, especially during particularly volatile periods like last week.

At age 13, Mya Parker is already active on both Twitter and YouTube. In fact, she said she learned almost everything she knows about investing from watching YouTube channels like “Financial Education,” which uploads videos with titles like “The Fed Just Did What! Federal Reserve Go Brrrrrr” and “Are Airline Stocks Cheap to Buy Now!?”

Now, she runs a YouTube channel of her own, where she posts videos detailing her thoughts on her investments in companies like electric vehicle maker

Arcimoto,

Roku Inc.

and

Dropbox Inc.

Gavin Mayo, a 19-year-old college student, has made his name on TikTok. He’s shared everything from videos parodying WallStreetBets to short and snappy explainers on gamma squeezes to his more than 230,000 followers on the platform.

Mr. Mayo admits his parents aren’t exactly enthused he spends so much time trading and posting online. To placate them, he tries to stay on top of his grades while maintaining a busy posting schedule.

“I don’t know if they really understand what I’m doing,” Mr. Mayo said of his parents’ views on his day trading adventures. “They’ve kinda just been safe with their 401(k)s.”

Meet the parents

Parents do have some degree of control over their children’s investing. In the U.S., minors need an adult—typically a parent—to open a custodial account for them. The adult retains control of the account until the minor reaches the age of majority. (In most states, that is 18; in some, it is 21.)

But any money in the account legally belongs to the minor. That means parents can’t withdraw money once they have transferred it to the account, unless they use it for the direct benefit of the child.

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Gains from investments are also subject to taxes—something financial advisers worry young investors scrambling to make a quick buck may be unaware of. While profits from stock sales and dividends of up to $1,100 are tax exempt in many cases, the next $1,100 is typically taxed at the child’s tax bracket—usually between 10% and 12%. Beyond that, what’s known as the Kiddie Tax kicks in. That means the child’s investment income is taxed at the parents’ marginal tax rate, instead of the lower child’s tax rate.

Even if minors don’t wind up selling their stocks, custodial accounts can cost those who apply for college financial aid.

Custodial accounts count as assets belonging to the child, meaning the bigger portfolios are, the less aid they are eligible for. Some financial planners estimate that financial aid payouts can be reduced by as much as 20% of the funds in a custodial account.

‘You have to be willing to lose it all’

Individual investors’ gains have been huge this year. But the losses have been just as punishing for those caught off guard.

GameStop, for instance, has plunged in a punishing reversal of its late January rally. Investors following the online crowd also racked up big losses last year when oil futures swiftly dropped below zero and highflying stocks like

Hertz Global Holdings Inc.

and

Eastman Kodak Co.

collapsed.

That hasn’t put off parents from supporting their children’s forays. Some are simply pleased their children have found a new hobby—even if they view their investment style as more akin to gambling than anything else.

“I haven’t seen Connor so excited about anything since the start of the pandemic,” Ms. O’Flanagan said.

And if Connor’s investments don’t pan out? “He’s not going to lose thousands or millions of dollars,” she said.

Jake, the 16-year-old in Brooklyn, has more to lose. He’s more than doubled the value of his portfolio since starting his investment journey. But under the agreement he made with his father, he won’t withdraw any of the money in his account until he turns 25.

“You have to be willing to lose it all,” Jake said.

—Michael Wursthorn contributed to this article.

Jake Schlein, left, has more than doubled the value of his portfolio as an investor. Under an agreement with his father Michael Schlein, right, he won’t withdraw any money in his account until he turns 25. ‘You have to be willing to lose it all.’



Photo:

Amy Lombard for The Wall Street Journal

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