Is Custodial Brokerage Account a Good Investment for Kids?

In this blog post, we’ll talk about these custodial brokerage accounts and other investment accounts for kids, how they work and why you should consider opening one today! 

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?

Both UGMA and UTMA accounts are similar in that they are custodial accounts with assets held within them for the benefit of the minor.

→ UGMA (Uniform Gifts to Minors Act) Account

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. 

→ UTMA (Uniform Transfer to Minors Act) Account

UTMA (Uniform Transfer to Minors Act) accounts are also custodial accounts set up by parents or other custodians and are not limited to a certain dollar amount each year.

What is a Custodial Account for Stocks?

Custodial accounts allow you to invest in stocks, bonds, exchange-traded funds (ETFs) and mutual funds, but not riskier assets like stock options or choosing to buy on margin.

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