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Investing for your kids’ future: 7 options

These investment options help you grow your savings for your child’s future.

It’s never too early to start investing for your kids’ future, and teach them a thing or two about investing in the process. The good news is that there are a variety of investing options to choose from — everything from 529 plans to save for college to brokerage accounts to jumpstart your kids’ long-term savings. Explore your options so that your kids’ portfolios are well underway by the time they hit adulthood.

7 investing accounts for kids

The type of investment account you choose for your kid depends on your goal. If your goal is to grow your money for your kids’ future, then go with a regular brokerage account. But if you’re looking to teach your kids investment skills then choose an account with kid-friendly savings tools. Let’s explore your options.

529 Plan

A 529 Plan gives you the chance to invest your after-tax dollars for your child’s future education expenses. You can choose from a prepaid tuition plan or an education savings plan.

The prepaid tuition option lets you pay for your child’s tuition ahead of time so that they don’t have to worry about it when they’re college bound.

With the savings plan, you can invest for college expenses as well as for elementary or high school education costs up to $10,000 per year. Another bonus: you bypass federal income taxes on the money you withdraw, if you use it for your kids’ college.

You might also qualify for state tax deductions on the amounts you contribute. However, you’ll need to choose your own investments for a more hands-on approach than other accounts for kids.

Coverdell Education Savings account

The Coverdell Education Savings account works much the same way as the 529 savings plan since you can invest for your child’s elementary, high school or college education. It also forgoes taxes on money that you use for your kids’ education.

However, you can only contribute up to $2,000 per year, which is a lower amount than investing in a 529 savings plan. You also need to meet the income requirements — you can’t make more than $110,000 per year as your modified adjusted gross income, or $220,000 if you’re filing jointly.

The Coverdell Education Savings account gives you more options in the types of investments you can make, compared to a 529 savings plan.

Custodial investment accounts

It’s never too early to start investing — and parents can get their kids invested in a custodial account at any age, as long as they earn income from a job or business. You’ll find a variety of custodial accounts to choose from, including IRAs for retirement and UGMA or UTMA accounts for tax-advantaged investing.

Some companies offer kid-friendly platforms that help you manage custodial accounts. For example, Stash+ and M1 Finance offer custodial accounts with personalized portfolio recommendations. You’ll pay a fee to use either account, but the cost is offset by investing gains.

Finder's pick for custodial investment accounts


Invest in your favorite stocks or in curated portfolios with automatic rebalancing to help manage risk.

  • Unlimited free stock trades
  • No annual or monthly fees
  • Built-in portfolio diversification tools

Dive deeper: Custodial accounts: Invest for your kids

Custodial IRA

Custodial IRAs or individual retirement accounts let you invest in the usual investing options like stocks, bonds, ETFs and mutual funds, but your investments sit in a tax-advantaged account.

You have two options:

  • Traditional IRA. Fund this account with pre-tax dollars, but withdrawals after age 59½ are taxed as regular income.
  • Roth IRA. Fund a Roth IRA account with after-tax money, but anything withdrawn after age 59½ is tax-free.

Uniform Gifts and Minors Act (UGMA) account

A Uniform Gifts to Minors Act (UGMA) account is similar to a custodial IRA in that you can invest in stocks, bonds, mutual funds and insurance policies for your child. But a UGMA account doesn’t limit how much you can put in it, unlike an IRA — though you’ll only avoid taxes on the first $15,000 deposited per year. When your child reaches the state’s age of majority, the UGMA account is transferred to your child in full.

Dive deeper: How do UGMA accounts work?

Uniform Transfers to Minors Act (UTMA) account

A Uniform Transfers to Minors Act (UTMA) account works the same way as UGMA accounts, letting you invest in stocks, offering tax exemptions and transferring the account to your child when they reach the state’s required age. But UTMA accounts let you invest in a wider range of assets, including real estate.

One investing platform for UTMA accounts is Investr Jr., which lets you send allowances and rewards and approve investments before a purchase. It also teaches about investing through articles and its virtual simulator Fantasy Finance. If you’re looking for a UTMA or UGMA account with robust types of investments, you could go with Interactive Brokers which offers both US-based and international stocks.

Unfortunately, both UGMA and UTMA accounts can disqualify your child from getting financial aid in the future.

Crypto investment accounts

If you’re well versed in investing or you want to invest in the future of decentralized money, you could look at opening a crypto wallet for your kids with you as the custodian. From there, you could buy different cryptocurrencies and track their ups and downs in the market. Currently, crypto is volatile in the market because it’s a new type of security, so you’ll need to be okay with taking on that risk.

To get started, you could open an EarlyBird account, which lets you and your kids invest in Bitcoin and Ethereum, and offers portfolios that you don’t have to build yourself. Digital brokerage Stockpile also lets kids invest in crypto as well as stocks and ETFs with as little as $1 on hand.

Finder's pick for crypto investment accounts

This gifting app lets you open a custodial account for your child. Brokerage services are FINRA and SIPC insured by Apex Clearing Corporation.

  • Safe and secure
  • Expertly Crafted Portfolios
  • Trusted Financial Advisors
  • FINRA and SIPC insured
Go to site
on EarlyBird's secure site

Related link: Crypto for kids

Other kid-friendly investment accounts

There are a host of investment and kids’ banking platforms that cater to kids learning about investing, made possible because the platforms are tied to parent’s accounts. See if any of these land with your investment strategy.

  • BusyKid. This robust app lets kids and teens track chores, manage money and invest. With Busykid, kids can invest in over 4,000 stocks and ETFs, free from trading fees.
  • Copper. An account with Copper gives teens access to free automatic investments. Plus teens manage stocks and ETFs personalized to their risk appetite.
  • Fidelity Youth. Let your kids choose fractional investments in stocks, ETFs, options and mutual funds without commissions. Kids also get access to a handy prepaid debit card and articles to learn money management.
  • Greenlight. This all-in-one account offers either light investing for parents or investing for kids with up to 4,000 stock and ETF options, based on your plan. With Greenlight, kids also enjoy cashback rewards, savings bonuses and personal safety features like SOS alerts.

Finder's pick for kid-friendly investment accounts


Offers investing tools for kids, along with all the Greenlight basic features. Includes cell phone and identity protection.

  • Teaches investing skills
  • Up to 2% rewards
  • Cell phone and identity protection
Go to site
on Greenlight's secure site

Related link: The best debit cards for kids and teens

How to open a brokerage account for your kid

Opening an investment account for your kid takes a few steps, and the hardest part is narrowing down your brokerage options. Take a quick look at the account-opening process.

1. Choose a broker.

Scan the fine print for inactivity fees, transfer fees and the like — commissions are largely a thing of the past. Then, prep your child to take over the investments with accounts that are easy to navigate and provide kid-focused educational content. And don’t forget to scout third-party sites like the Better Business Bureau and Trustpilot to find out if the broker is trustworthy.

2. Turn in your application.

Fill out an application form with all the required personal information for both the custodian — the adult who will manage the account — and the beneficiary — your child. Be prepared to supply basic personal details as well as your Social Security number and driver’s license.

3. Send money to the account.

Provide your bank account and routing number and choose the amount to invest. Make sure to check if your broker requires a minimum opening amount for funding. Otherwise, you can fund the account with a wire transfer or check. Bank and wire transfers may take two to three days to go through, while processing checks will vary based on how far you live from the brokerage office.

4. Explore investments.

Once your money lands in the brokerage account, you’re ready to invest. Use a tool like a stock screener to filter potential investments by price, company name, ticker symbol or how long they’ve seen upward trends in the market.

Related link: Investing for teens

Compare investment accounts for kids

Narrow down top investment accounts by monthly fee, age requirements and features to find the best for your budget and financial goals. Select Compare for up to four products to see their benefits side by side.

Name Product Annual or monthly fee Age requirements Features Offer
Finder Rating: 4.3 / 5: ★★★★★
$4.99 per month
6 to 18 years old
  • Instantly send money to your child
  • Automates allowance
  • Spending controls & limits
  • Get 2 months FREE for a limited time with code AFUSS171. Then pay just $4.99 per month
Get an extended 2-month free trial of the GoHenry kids' debit card and app when you sign up with Finder's exclusive code: AFUSS171. Offer ends on April 6, 2023.
Get interactive money and investing tools for your kids, including expert-developed games and quizzes. Offers strong parental controls that allow you to set where and how much your child can spend.
Greenlight Max
Finder Rating: 4.6 / 5: ★★★★★
Greenlight Max
$9.98 per month
Any age
  • Teaches investing skills
  • Up to 2% rewards
  • Cell phone and identity protection
Offers investing tools for kids, along with all the Greenlight basic features. Includes cell phone and identity protection.
Not rated yet
$4.99 per month
Any age
  • Easily receive money from family and friends
  • Earn rewards and bonuses
  • Diversify with crypto
Kickstart your child’s financial future with UNest’s saving and investment tools. Add the whole family to the same account at no extra cost. Family and friends can gift your children money directly through the app, where you can also access learning tools, rewards and bonuses and an easy introduction to crypto investments.
Finder Rating: 4.2 / 5: ★★★★★
$0 per month
  • Teens build credit safely
  • Savings and investing tools
  • Cashback rewards
Teens can build credit safely without overspending or paying interest. Get savings and investing tools alongside cashback rewards. $0 monthly fees.
Finder Rating: 4.2 / 5: ★★★★★
$3.95 per month
7 to 17 years old
  • Rewards program
  • Chores and allowance
  • Spending controls & limits
  • Financial literacy courses, quizzes & games
Robust financial literacy platform. Parental control and notifications. Auto-fund and auto-allowance capability

Why is it important to invest early?

When you invest for your kids early, you’re giving them a major head start in the race for financial freedom. The power of compound interest is on their side because they have more time to let the investments grow. Plus, you get the chance to teach your kids how investing works and even let them choose which investments they’d like to make.

Imagine that you invest $50 a month in a custodial account. In 15 years, you’d have contributed $9,050, but your child would have about $14,700 — based on a 6% annual growth rate with interest compounded monthly. If they continue investing $50 a month as an adult, they’d have over $50,500.

Period of TimeTotal at 6% growth rateAmount invested
3 years$2,026.64$1,850.00
6 years$4,392.04$3,650.00
9 years$7,222.68$5,450.00
12 years$10,610.05$7,250.00
15 years$14,663.64$9,050.00

Tax breaks for a child’s investments

Another major upside to investing early is that kids get more tax breaks on their investments. The exact amount of taxes they’ll pay depends on the type of account. For example, both Coverdell and 529 plans are free from federal taxes at the time that they withdraw money, as long as it’s used for education expenses.

UGMA and UTMA accounts avoid taxes on the first $15,000 deposited each year that you invest for your kids. Your child will need to file taxes on any gifts beyond $15,000 per year.

Finally, if you go with a traditional brokerage account, your child will need to pay taxes each year on investment earnings that total more than $2,300.

Tips for kids’ investing

There’s no one-size-fits-all answer to investing. The right strategy depends on the amount of risk you’re willing to take and other factors. Try one or more of these strategies to kick off your kids’ investments.

  • Chat with your kids about investing strategies. If you’re already investing for your kids, why not make it a regular part of your family’s conversation? Doing so helps kids learn about money and what investing is all about.
  • Start with investing games. If your kid isn’t ready for real-world investing, help them learn through stock market games and courses that teach them investing.
  • Consider letting kids choose their investments. Take the opportunity to prepare your kid for adulthood by letting them choose their favorite companies or strategies. Then, guide them toward the best investment choices.
  • Invest in name brand stocks. Often called blue chip stocks, stocks in major corporations like Amazon and Disney are less likely to waver with the stock market’s ups and downs than in smaller companies.
  • Spread your money across multiple investments. You lower the risk of losing money when you keep a variety of investments in your portfolio. ETFs and mutual funds make good options for this strategy because they spread your money across multiple companies.
  • Play the long game. You might want to stick with your portfolio for years or decades to allow time for a return on your investment, unless you’re up for the challenge of learning day trading.
  • Balance your portfolio with low-risk bonds. Perhaps the least exciting on this list is bonds, which are steady, fixed-income investments capable of providing consistent returns.
  • Set aside time to review your kids’ investments. It’s easy to forget about your investments, but you should review how they’re doing regularly, especially if you’re day trading.

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