In today’s uncertain financial situation, most adolescents want to begin developing wealth at an early age. Mobile investing apps such as Robinhood have enabled people to invest more easily than ever before. These apps enable a user to purchase and sell stocks, ETFs, options, and cryptocurrencies with just a couple of taps. It is convenient and is very attractive to the youths who are tech-savvy. However, the increase in popularity of such platforms also raises the question of safety. Parents always question, is Robinhood safe? This is a legitimate concern and should be taken into serious consideration. This article will provide a complete picture of Robinhood including its review, features, age, restrictions, and safety measures. It also highlights the effects of investing, threats of gambling behavior, and safer choices for young investors.
What is Robinhood app?
Robinhood is a financial tech application that supports the trade of stocks, exchange-traded funds (ETFs), options and cryptocurrencies. Robinhood was developed in 2014 and has revolutionized the brokerage sector because instead of charging traders a fee to trade on their platform, just like the brokers used to do in the olden days, Robinhood is, instead, giving them trades free of charge. The simple and user-friendly interface allows even unskilled customers to access the app and start implementing their investment. One can open a new account, deposit the necessary funds and begin trading in just a few minutes.
Traits and adamance
Robinhood has some distinctive features that appeal to new investors. Some of them are below:
- Fractional shares: The ability of fractional share ownership helps to drop the investment floor. Moreover, fractional trading applies to a stock priced too high to purchase in full.
- No commissions: Trading in stocks, ETFs or options is commission-free.
- Live market information: One gets up to date prices and news.
- Instant deposits: Funds are available immediately after you deposit them.
- Easy to use interface: The interface is straightforward and user friendly and therefore attractive to young and inexperienced investors.
- Mobile-first experience: The application is great for smartphones, adapting to the patterns of most young users.
Limitations
- In spite of the popularity, Robinhood has been accused of having very little educational material and no professional research tools. The app has fewer options of doing deep market analysis as compared to traditional brokers. This may end up with users having little information to make sound investments.
What is Robinhood app age rating?
Robinhood has a strict age requirement for creating an account. According to the law, a United States user who wants to use the brokerage accounts must be over the age of 18. This way, minors are safe from the risk of investing and incurring financial liabilities.
Both Apple and Google play stores categorize the app as 17+. This age rating indicates the money and legal challenges associated with the usage of the platform. However, even with these limitations, some teens are still curious to access Robinhood by entering fake credentials. This goes against the terms of service of the app and can lead to suspension or closure of the account.
Robinhood lacks custodial and any other type of monitored accounts under legal guardianship. A custodial account is a type of brokerage account under which an adult controls shares on behalf of a minor. The lack of such features in Robinhood implies that teens are not allowed to invest using the platform until they turn into adults. Parents should be aware of these age restrictions and ensure that their teens do not gain access to Robinhood without permission.
Does Robinhood app have parental controls?
Parental controls or any form of monitoring is not a feature of Robinhood. There is no way for parents to impose spending limits, set alerts regarding trades, or limit the type of trades that can be made in the app.
This may pose issues in families with teens using the app, as the parents lack control. Teens can engage in extensive trading or risky trading without regulations or guidance. This augments the risk of economic losses and low investment culture.
Parents can, however, make use of device-level parental controls to manage the apps. As an illustration, Screen Time (developed by Apple) and Google Family Link enable parents to list the apps that they can download and limit their usage. It can be effectively used to restrict access to Robinhood.
Additionally, there are third-party monitoring apps, such as FlashGet Kids, that can not only track the apps used by the child but also alert parents of any risky behavior. Although these apps cannot directly control the trading activity, they can help supervise it.
Use parental controls to track and manage your kids’ digital activity.
The privacy policy of Robinhood also covers the collection of data. The firm does not obtain personal information from users under the age of 13 without their knowledge, except when they are using credit cards. Parents have the right to request a review or deletion of their child’s data. However, the same privacy protection does not apply in the case of investment accounts and trading.
Is Robinhood safe for teens to invest?
Robinhood can be considered a secure platform for adult investors by the U.S. Securities and Exchange Commission (SEC) and is part of the Securities Investor Protection Corporation (SIPC). The SIPC covers securities up to $500,000, $250,000 of which is for cash, in the event of brokerage failure. Additionally, Robinhood offers coverage under SIPC insurance to protect its customers’ accounts.
Safety for teens is, however, another issue. The app’s interface promotes intensified buying and selling, as well as quick decisions. This may cause impulsive behavior, although it is more likely among young users who are new to these trades. Teenagers may not fully comprehend the risks associated with investing. The stock market is unpredictable and volatile. Losses can be incurred rapidly and suddenly.
The interface of Robinhood, represented as a gamified and straightforward design, can conceal the complexity of investing. This may lead the teens to develop false confidence. They may think that investing is a safe and straightforward process. This misunderstanding may lead them to make poor economic decisions and incur significant losses.
A 2021 data breach incident revealed millions of names and email addresses of Robinhood users. The breach concerned privacy and account security, even though no financial information was there. The users are advised to adopt long passphrases and use two-factor authentication to ensure the security of their accounts.
Additionally, Robinhood is not a firm that provides financial advice to individuals. Without adequate counseling or knowledge, teens who use the app end up trading blindly. This further increases the likelihood of errors and risky trading. The app does not have a provision for preventing young users from making high-risk transactions.
How investing impacts teens?
Benefits
There are beneficial outcomes of investing for teenagers:
- It imparts valuable financial knowledge and fosters personal responsibility.
- Adolescents learn the ways of managing money and budgeting.
- Compound interest and market appreciation can help create wealth in the long term by investing early.
- Since teenagers are likely to acquire financial literacy, it is beneficial as they are being educated about the functioning of the markets, the connection between reward and risk, and the significance of diversification.
- It can also impart the virtue of patience, as well as teach discipline, since being successful as an investor in most cases requires a long-term outlook.
- Adolescents improve their critical thinking through their analysis of companies and informed decision-making.
Risks
Teen investing also poses some significant risks:
- Teenagers may not fully understand the volatility of the stock market and there is a potential for significant losses.
- Rash trading will result in heavy losses.
- Stress and negative decision-making can result from emotional investing, which is driven by fear or greed.
- These risks are compounded by the fact that one lacks experience. Adolescents can fall into bad practices, including overtrading or pursuing short-term gains.
- In the absence of proper guidance, the investment can turn out to be a source of fear rather than a source of strength.
Psychological and social factors
- The psychological effects of investing among teenagers are massive. It can be addictive as you get a sense of excitement when you earn some quick money. Such effects are enhanced through social media, where teens encounter peers bragging about profits or posting risky tactics. This culture may pressure young people into making dangerous decisions.
Gambling concern
- Robinhood has been criticized for its similarity to gambling sites. Elements of gamification, such as confetti animations that indicate a trade has been confirmed, can trigger the release of dopamine in the brain. This is similar to the impact of slot machines or sports betting applications.
- Adolescents are especially vulnerable because they still have an immature impulse control. They can pursue short-term gains and over-engage in risk-taking. Such actions may cause addiction and monetary loss. There is a thin line between investment and gambling.
Alternatives for teens who are interested in investing
Young people who want to invest can find safer alternatives to Robinhood. A common choice is custodial accounts. These accounts are operated and opened by an adult taking custody of a minor. Until the teen reaches the legal age, the account is formally controlled by the adult.
Custodial accounts have legal and tax benefits. They enable parents to monitor investments, protect their interests, and make informed decisions. There are several brokerage companies that provide educational material for young investors.
Fidelity Youth, Acorns Early, and Bloom are the other platforms for teens. These portals offer parental controls, educational resources, and age-appropriate content. They help teens understand how to invest in a safer setting.
| Platform | Features | Age requirement | Parental controls |
| Fidelity Youth | Custodial accounts | Under 18 (with parental consent) | Yes |
| Acorns Early | Automatic Investing | Under 18 (with parental consent) | Yes |
| Public.com | Fractional shares | 18+ | Limited |
| M1 Finance | Comprehensive portfolio control | 18+ | Limited |
| Bloom | Teen-oriented | Under 18 (with parental consent) | Yes |
Should teens use Robinhood？
Robinhood poses risks and leaves much to be desired as a trading application. The site is adult-oriented and does not offer protection for young users. Adolescents are not allowed to sign up for an account, and the application lacks options for parental controls and supervised accounts.
Parents should help their teens to open custodial accounts or accounts specifically designed for them. There are alternatives that offer better protection. It is also essential to monitor your teen’s online activities with parental control tools.
Parents should have open discussions regarding the risks and merits of investing between their children. Parents should demonstrate the importance of managing money through responsibility and emphasize the need to acquire financial education. They should encourage learning before trading, so that teens can build a solid foundation for future investing.
Tips for parents
- Discussion: Talk about risks, returns, and long-term objectives. Communicate openly and honestly about your investment.
- Limits: Limit access to applications on a device level.
- Monitor activity: Review account statements and deals regularly.
- Education: Utilize school, library, and financial institution resources.
- Be a role model: Use your personal experience and offer advice based on it.
Conclusion
Robinhood is safe to use for adults and is not for minors. The interface, absence of parental controls, and the potential for risky transactions make the app dangerous for teens. Parents should consider safer alternatives. Custodial accounts and teen-oriented platforms provide better security. The most important thing is financial education. Teach your adolescents to make the right decisions. Monitor their online activities with the help of third-party parental control tools such as FlashGet Kids. Help them establish a solid foundation for investing in their future.
