3 Best Investment Accounts for Kids [Child Investment Plans]

I am a parent of two small children, and I have been investing for both of them ever since each arrived home from the hospital.

I don’t know how many hours I spent researching, reading articles, and watching videos trying to figure out the best investments for kids and which child investment plans are best suited for their future. But I do know that there were so many options, I felt overwhelmed pretty quickly!

That’s why I’m writing this article about the best investment accounts for kids—and in fact, that’s why I’ve created this entire website!

As for this article? My hope is to provide parents and grandparents like you with the best and latest options available. That way, you can drill into which investments work best for your child’s needs based on their unique situation.

Let’s get started!

Best Investment Accounts for Kids—Top Pick

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Child Investment Account Options: Taxable

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First, we’ll delve into the type of investing accounts that have no special tax advantages.

1. Joint Brokerage Accounts

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The standard type of brokerage account is an individual brokerage, in which one person is listed as the account owner.

A jointly owned brokerage account, however, allows two or more people to sit on the account’s title and act as owners of all assets within the account.

These accounts most commonly exist between spouses. However, they can also be opened between two or more individuals who share financial goals (say, unmarried partners or business partners), or more to the point of investing for kids, multiple family members (say, a parent and child).

When a parent and child have a jointly owned brokerage account, they can share in the decision-making of what to buy and sell. Many investing apps for kids, such as the Fidelity Youth™ Account, a Fidelity® minor account, allow you to open a brokerage account with joint ownership.

Fidelity Youth™ Account ($50 bonus for teens, $100 bonus for parents)

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• Available: Sign up here
• Price: No account fees, no account minimum, no trading commissions*
• Platforms: Web, mobile app (Apple iOS, Android)
• Promotion: Teens get $50¹ on Fidelity^® when they download the Fidelity Youth™ app and activate their Youth Account; parents get $100 when they fund a new account

Is your teen interested in jumpstarting their financial future? Do you want them to build smart money habits along the way?

Of course you do! Learning early about saving, spending and investing can pay off big when you start on the right foot. And one tool that can help your teen get that jump is the Fidelity Youth™ Account—an account owned by teens 13 to 17 that’s designed to help them start their money journey. They can start investing by buying most U.S. stocks, exchange-traded funds (ETFs), and Fidelity mutual funds for as little as $1!⁴

Your teen will also get a free debit card with no subscription fees, no account fees³, no minimum balances, and no domestic ATM fees⁵. And they can use this free debit card for teens to manage their cash and spend it whenever they need.

And as for building smart money habits? You and your teen can access your account through the Fidelity Youth™ app, which has a dedicated Learn tab packed with materials developed specifically to help teens develop good financial habits. Not only will Fidelity’s interactive lessons, videos, articles, tools, and calculators accelerate their learning—but for every level they complete, reward dollars will be deposited into their account to use however they want.

Controls parents want and need

A parent or guardian must have or open a brokerage account with Fidelity^® to open a Fidelity Youth™ Account. For new Fidelity^® customers, opening an account is easy, and there are no minimums and no account fees.

Parents and guardians have plenty of tools they can use to monitor their teen’s activity: They have online account access, can follow monthly statements and trade confirmations, and can view debit card transactions made in the account.

To make it even easier, you can set up alerts to notify you of trades, transactions, and cash management activity, keeping you firmly in the loop on actions your teen takes across the Fidelity Youth™ Account’s suite of products.

If your teen has an interest in learning about investing and taking their first steps toward building their financial journey, you should consider downloading the Fidelity Youth™ app and opening a Fidelity Youth™ Account. The account comes custom-built for their needs, which will help them become financially independent and start investing for their future.

Read more in our Fidelity Youth™ Account review.

 

2. Custodial Accounts

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Custodial accounts allow you to put investments in a special account for a minor child or grandchild. As the account’s custodian or trustee, you have control of it until your child reaches adulthood—typically 18 to 21 years old. Once your child reaches adulthood, they become the owner of their individual account and can do whatever they want with the funds.

There are two main types of custodial account: Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA). Let’s quickly look at the two main differences between UGMA and UTMA:

1. A UGMA custodial account can be used to hold only strictly financial assets, including (but not limited to) stocks, bonds, mutual funds, exchange-traded funds (ETFs) and insurance products. UTMA accounts can hold those assets, but also any property—say, real estate or cars.
2. The UGMA custodial account structure has been adopted in all 50 states. However, only 48 states have adopted the UTMA custodial account. (South Carolina and Vermont are the exceptions.)

Parents, grandparents and other loved ones can make sizable contributions to these custodial accounts by giving up to $17,000 per year per individual ($34,000 per married couple) without triggering the gift tax.

If you are concerned about the impact of your child’s assets on their eligibility for federal financial aid, then a custodial account might not be right. Students are expected to contribute a higher percentage of savings versus what their parents might be able to, usually 20% versus a maximum 5.6% of savings for the parents.

You might consider one of the leading custodial accounts through Acorns Early, offered by the Acorns app.

Acorns Early

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• Available: Sign up here
• Price: Acorns Premium: $12/mo.

Acorns offers a custodial brokerage account for parents and grandparents interested in opening an investment account for their family called Acorns Early.

Acorns Early offers investment portfolios of various risk levels for kids, so you can feel confident in the account you’re opening up for your little one. This app can be a great way to teach minors how to invest money.

The best part about Acorns is that it doesn’t require any minimum deposit to get started and allows you to contribute money on a regular basis.

One of the best ways to start saving for your grandchild is through a savings and investing account product like Acorns Early, which you can access by subscribing to Acorns Premium.

Read more in our Acorns review.

 

UGMA Accounts With EarlyBird

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• Available: Sign up here
• Price: $2.95/mo. for one child, $4.95/mo. for families with 2+ children

EarlyBird is a mobile app that allows parents and guardians to set up a Uniform Gifts to Minors Act (UGMA) account (more on those below) to gift money for investments to their children. This app provides a convenient and inexpensive way to gift money, with funds available to go toward any expenses that will benefit the child.

When opening an account to invest for your children, EarlyBird allows you to choose from five strategic ETF-only portfolios, with investing goals ranging from conservative to aggressive, based on your stated risk tolerance and overall investor profile.

Do family and friends want to provide a gift, but think money is too impersonal? With EarlyBird, they can record a video to go along with their financial contribution, personalizing these moments which last a lifetime. And if you’d like to give but the recipient doesn’t have an EarlyBird account, you can text them a link from the app to the recipient’s phone number. EarlyBird also has a “Moments” feature that allows parents to begin to save and share special milestones and memories alongside their investments.

When parents or guardians set up a new custodial investment account through EarlyBird, they must start with a $15/month recurring contribution minimum. However, you can change that recurring contribution amount higher or lower as your budget allows or necessitates.

Consider opening an EarlyBird account today and receive $15 to get you started after opening your account.

 

3. Traditional and Roth IRAs

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An Individual Retirement Account, or IRA, is a tax-advantaged savings account where you keep investments such as stocks, bonds, ETFs, mutual funds, and other assets and vehicles.

There are two ways IRAs can be useful in saving for your child: Using your own IRA to contribute toward your child’s education, or opening an IRA for your child to save toward their retirement.

Contributing toward your child’s education

First, you need to know about the two primary types of IRAs:

• Traditional IRA: Traditional IRAs allow you to contribute pretax dollars toward your retirement savings equal to the lesser of your earned income or $6,000 per year (you can contribute an additional $1,000 per year if you’re 50 or older). You take a tax deduction at the time of contribution and pay taxes when you make withdrawals. If you withdraw before age 59½, you pay an additional 10% tax penalty.
• Roth IRA: Roth IRAs work in reverse, allowing you to contribute after-tax dollars toward your retirement. This enables your investments to grow tax-free over time. Contributions are never taxed again—not while they’re in your account, nor once you withdraw them, which you can do at any time. However, earnings are subject to taxes and penalties if you withdraw them before age 59½.

These accounts aren’t tied to an employer, and instead supplement your savings alongside a workplace retirement plan, such as a 401(k).

Opening an IRA for your child

If your child can begin saving for retirement as a teenager, those additional years of savings can result in significant returns through additional years of compounding, making a custodial IRA the best kids account for long-term investing.

Thus, parents might consider opening a custodial IRA—an IRA opened and held by an adult custodian for a minor, typically their child—to start investing money toward retirement.

But, which type of IRA makes the most sense? Well, let’s go back to their tax treatment:

Traditional IRAs allow you to claim a tax deduction now and pay taxes later—valuable if you have higher tax rates now than you anticipate paying in retirement. Conversely, Roth IRAs lock in your lower tax rates now and withdraw money in retirement when you might earn more money later.

Because teens are likely to earn lower incomes now, it generally makes the most sense to open a custodial Roth IRA to begin their retirement savings.

Note: If your teen has earned income—say, from a summer position or after-school job—you might be able to let them keep their earnings while you contribute to their Roth IRA on their behalf. Parents who have the means can contribute up to the maximum annual contribution as long as their teens earn enough money. The IRS does not care where the IRA funds come from, so long as it doesn’t exceed what your child earns in one year.

For example, if your child works as a waitstaff member and earns $2,500 for the summer, you can contribute $2,500 to their Roth IRA and allow them to keep their wages instead. That way, your child can enjoy their wages and still have something saved away in their retirement account.

Just remember: Children must have earned income for anyone to be able to contribute to their custodial IRA.

How to Open a Custodial IRA for Your Child

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If you wish to open a custodial IRA for your child, the custodian of a child’s account (that’s you!) holds responsibility for managing the account’s assets until the termination age as determined by state law. At this point, the assets and the account turn over to your child.

Here’s how to do it: If your child is a minor (under 18 or 21 years old, depending on your state of residence), many of the best stock investing apps for beginners will let you set up a custodial IRA.

E*Trade (Our Top Pick for Custodial IRAs)

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• Available: Click “Open Account” below
• Best for: Intermediate investors
• Platforms: Web, mobile app (Apple iOS, Android)

Most people know E*Trade as one of the leading providers of individual brokerage accounts, but you can also put the powerful platform to work saving for your child’s future.

E*Trade’s IRA for Minors offering allows you to open up a traditional custodial IRA or a custodial Roth IRA for children under age 18 who have earned income. Within the account, you can build a personalized portfolio through thousands of stocks, bonds, ETFs, and mutual funds, or you can have E*Trade select your holdings for you through its Core Portfolio robo-advisory service.

Just like with its individual brokerage accounts, E*Trade custodial IRAs offer zero-commission stock, ETF, and options trading. It also has a leg up on some platforms by offering $0-commission mutual fund, Treasury, and new-issue bond trading.

And if you want to learn more about investing—or want your young one to learn alongside you—E*Trade also boasts educational resources, including articles, videos, classes, monthly webinars, and even live events.

Read our review to learn more, or visit E*Trade and sign up by clicking “Open Account” below.

 

How to Invest for Your Kids

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Investing for kids isn’t hard—if you know where to start. And the best place to start is with two of the basics:

1. The best investments for kids. (Click the link to learn more about that.)
2. The best investment accounts for kids, which we dive into here.

When it comes to investment accounts, don’t think about it in terms of what’s best period. Just think about it in terms of what’s best for you and your financial situation. Maybe you care about parental controls. Maybe you care about certain tax advantages. Maybe all you care about is making sure the account can hold cheap index funds.

So just remember: Keep your own preferences and needs in mind as we explore the best accounts for children.

How to Teach Your Kids Self-Sufficiency

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Investing for kids isn’t hard—if you know where to start. Parents often stress about providing for their children into adulthood and transitioning them to making their own money management decisions.

Teaching kids about money and letting them start investing as a minor should go a long way toward assuaging this concern.

And you don’t need to come from money to build a solid financial future. If you’ve got spirit and persistence, there’s no need for you to come into the world with a silver spoon.

Not only should you focus on teaching your children financial literacy, you should show how navigating these decisions regularly will play critically important roles throughout their life.

For parents intent on putting their kids on the right financial path as early as possible, here’s a quick set of steps to get them started:

• Build an understanding of money, its worth and how to earn it.
• Begin investing in your children’s future and showing them how to participate.
• Grow your children’s earnings potential through teaching and practicing soft skills like teamwork, compassion, and collaboration while encouraging schoolwork and extracurriculars.
• Teach kids how to combine these skills to build a career and invest their earnings toward a secure financial future.

With these steps, let’s now take a look at some of the best investments for kids and the child investment plans to consider for getting your child started.

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Terms and Conditions for Fidelity Youth™ Account

The Fidelity Youth™ Account can only be opened by a parent/guardian. Account eligibility limited to teens aged 13-17.

* $0.00 commission applies to online U.S. equity trades and exchange-traded funds (ETFs) in a Fidelity retail account only for Fidelity Brokerage Services LLC retail clients. Sell orders are subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal). Other exclusions and conditions may apply. See Fidelity.com/commissions for details. Employee equity compensation transactions and accounts managed by advisors or intermediaries through Fidelity Institutional® are subject to different commission schedules.

¹ Limited Time Offer. Terms Apply. Before opening a Fidelity Youth™ Account, you should carefully read the account agreement and ensure that you fully understand your responsibilities to monitor and supervise your teen’s activity in the account.

² The Fidelity Youth™ app is free to download. Fees associated with your account positions or transacting in your account apply.

³ Zero account minimums and zero account fees apply to retail brokerage accounts only. Expenses charged by investments (e.g., funds, managed accounts, and certain HSAs) and commissions, interest charges, or other expenses for transactions may still apply. See Fidelity.com/commissions for further details.

⁴ Fractional share quantities can be entered out to 3 decimal places (.001) as long as the value of the order is at least $0.01. Dollar-based trades can be entered out to 2 decimal places (e.g. $250.00).

⁵ Your Youth Account will automatically be reimbursed for all ATM fees charged by other institutions while using the Fidelity® Debit Card at any ATM displaying the Visa®, Plus®, or Star® logos. The reimbursement will be credited to the account the same day the ATM fee is debited. Please note, for foreign transactions, there may be a 1% fee included in the amount charged to your account. The Fidelity® Debit Card is issued by PNC Bank, N.A., and the debit card program is administered by BNY Mellon Investment Servicing Trust Company. These entities are not affiliated with each other, and Fidelity is not affiliated with PNC Bank or BNY Mellon. Visa is a registered trademark of Visa International Service Association, and is used by PNC Bank pursuant to a license from Visa U.S.A. Inc.

⁶ Venmo is a service of PayPal, Inc. Fidelity Investments and PayPal are independent entities and are not legally affiliated. Use a Venmo or PayPal account may be subject to their terms and conditions, including age requirements. 

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917