Investment Accounts for Kids [Custodial Brokerage Accounts]
Investing in your children’s future is a smart move. Not only will you be helping them, you will also secure your own financial stability for when they go to college, get married or need help with a down payment on a house.
What is a Custodial Account?
Custodial accounts allow a custodian, typically a parent or guardian, to have an account held with a financial institution that holds assets for the benefit of the named minor on the account.
What is a Custodial Brokerage Account?
Custodial brokerage accounts are financial accounts held in the name of a minor by one or more custodians. In this type of brokerage account, a custodian manages the investments held for the benefit of the minor named on the account.
What Types of Custodial Accounts Are There?
→ UGMA (Uniform Gifts to Minors Act) Accounts
UGMA (Uniform Gifts to Minors Act) accounts are custodial accounts typically set up by parents, guardians, grandparents or other relatives, who then serve as custodian for the child’s account until reaching the age of termination or majority in their particular state.
What Types of Custodial Accounts Are There?
→ UTMA (Uniform Transfer to Minors Act) Accounts
Where UTMA accounts differ is that they can hold any type of property, meaning they can hold the above financial instruments but also real estate and real property.
What is a Custodial Account for Stocks?
The primary point of opening a custodial account is to invest money in appreciating assets. Many parents and guardians use these accounts to invest for their kids and take advantage of compound interest as early as possible.
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