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Investing for kids isn’t just about saving money — it’s about giving them a financial head start.
When money is invested early, it has something incredibly powerful working in its favor: time. Thanks to compound growth, even small investments made during childhood can grow significantly over decades. A few hundred dollars invested early can potentially turn into thousands by the time your child reaches adulthood.
But many parents aren’t sure where to start. Should you open a custodial brokerage account, a Roth IRA or a 529 plan for education?
The good news is that investing for kids has never been easier. Many brokerages now offer custodial accounts for minors, and several investment apps let teens start learning how markets work.
We’ll walk through the best investment accounts for kids, how to start investing for your child, what investments may work best for long-term growth and common mistakes to avoid.
Best investment accounts for kids by goal
If you’re not sure where to start, here’s a quick breakdown based on your goal:
The best investment account for your child depends on your goals. Some accounts are built for flexibility, while others offer tax advantages or are meant specifically for education savings.
Here are the main ones to know.
Custodial brokerage accounts (UGMA and UTMA)
A custodial brokerage account is one of the most flexible ways to start investing for a child.
These accounts are opened and managed by a parent or guardian on behalf of a minor. The adult acts as the custodian and manages the money until the child reaches the age of majority, which is usually 18 or 21, depending on the state.
One of the biggest advantages of a custodial brokerage account is flexibility. Unlike a 529 plan, which is mainly designed for education expenses, money in a custodial account can generally be used for any expense that benefits the child.
These accounts can usually hold a wide range of investments, including stocks, exchange-traded funds (ETFs), mutual funds and bonds. That makes them a strong option for parents who want to build long-term wealth for a child without locking the money into one narrow purpose.
Pros
Flexible investment options including stocks, ETFs, mutual funds and bonds
No annual contribution limits
Available at many major brokerages
Can be used for a wide range of child-related expenses
Cons
Assets legally belong to the child
May affect future college financial aid
Tax treatment can be more complex than a standard savings account
Roth IRAs for kids
If your child has earned income, a custodial Roth IRA can be one of the most powerful long-term investing tools available.
A Roth IRA lets contributions grow tax-free. Qualified withdrawals in retirement are also tax-free.(1) Since children have such a long investing timeline, tax-free compounding can be especially valuable.
For example, if a teenager contributes a few thousand dollars to a Roth IRA and leaves it invested for decades, that money has a long runway to grow. That’s why a Roth IRA for kids is often one of the best options for parents who want to help their child build retirement savings early.
The catch is that your child must have earned income. That could come from a part-time job, babysitting, tutoring, lawn care or work performed for a family business, as long as the income is legitimate and properly documented.
Pros
Tax-free growth
Tax-free qualified withdrawals in retirement
Huge long-term compounding potential
Can help kids start saving for retirement decades early
Cons
The child must have earned income
Annual IRA contribution limits apply
The account is meant for retirement, not short-term goals
529 education savings plans
A 529 plan is a tax-advantaged account designed specifically for education savings.
Money in a 529 plan can grow tax-free, and withdrawals are also tax-free when used for qualified education expenses.(2) These accounts are commonly used for college, but they may also be used for certain trade schools and some K-12 expenses, depending on the rules.
For parents whose main goal is helping with future education costs, a 529 plan can be one of the most efficient options available. Many plans offer age-based portfolios that automatically become more conservative as the child gets closer to college age.
Pros
Tax-free growth for qualified education expenses
Often high contribution limits
May come with state tax benefits depending on where you live
Can be a strong fit for college-focused savings goals
Cons
Non-qualified withdrawals may trigger taxes and penalties
Investment options may be more limited than a brokerage account
Best suited for education-related goals
Teen brokerage accounts
Some brokerages offer accounts designed specifically for teenagers. These accounts allow teens to buy and sell investments while parents maintain visibility and oversight.
For example, the Fidelity Youth Account allows teens ages 13 to 17 to trade stocks and ETFs with parental supervision. The goal is to help young investors learn how markets work and build confidence managing money before adulthood.
Pros
Teens can gain hands-on investing experience
Parents typically maintain oversight or monitoring access
Can help build financial literacy early
Often includes educational tools and resources
Cons
Limited to older children, usually ages 13 to 17
Teenagers may take unnecessary risks without guidance
Fewer account options compared with full brokerage accounts
Investment apps for kids
Several fintech apps now combine debit cards, allowances and beginner investing tools designed for kids and teens.
Platforms like Greenlight and BusyKid allow parents to manage a child’s spending while also letting them invest a portion of their money. These apps often include parental controls and educational tools that explain how investing works.
For younger children especially, these apps can be a useful introduction to basic financial concepts like saving, investing and long-term planning.
Pros
Designed to teach financial literacy in a simple way
Often includes parental controls and spending limits
Kids can invest small amounts through fractional shares
May combine spending, saving and investing in one app
Cons
Monthly subscription fees are common
Investment choices may be limited
Some apps prioritize education over full investment flexibility
Getting started is usually easier than many parents expect. Most major providers let you open an account online in a relatively short amount of time.
1. Choose the right account type
Start by deciding what you want the money to do.
Choose a custodial brokerage account if you want flexibility.
Choose a Roth IRA if your child has earned income and you want tax-free retirement savings.
Choose a 529 plan if your main goal is education savings.
2. Open the account
You’ll usually need your child’s Social Security number, your own identifying information and a linked bank account to fund the account.
3. Fund the account consistently
You don’t need a huge lump sum to get started. Many parents use birthday money, holiday gifts or small recurring monthly contributions.
Consistency tends to matter more than trying to invest a large amount all at once.
4. Keep the investments simple
For most kids, a simple and diversified portfolio makes the most sense. Broad index funds and total market ETFs are often enough for long-term growth without adding unnecessary complexity.
Best investments for kids
Once the account is open, the next question is what to actually invest in.
Index funds (ETFs and mutual funds)
For most kids, simple and diversified investments tend to work best. That’s why many parents start with index funds.
An index fund is designed to track a market index, such as the S&P 500. Instead of trying to pick individual winners, it spreads money across many companies at once, which helps reduce risk over the long term.
Index funds come in two main forms: ETFs and mutual funds. ETFs trade throughout the day like stocks, while mutual funds are priced once per day. Both can offer low costs and broad diversification, which is why they’re commonly used for long-term investing.
For a child’s portfolio, either structure can work. The most important factor is choosing a low-cost, diversified fund and staying invested over time.
Individual stocks
Individual stocks can be a fun educational tool, especially if your child is excited about a particular company or brand. Owning even a small piece of a recognizable business can make the idea of investing feel more real.
Still, individual stocks are riskier and less diversified than broad funds, so they usually make more sense as a small part of a child’s portfolio rather than the whole strategy.
Robo-advisors
Robo-advisors can be a good fit for parents who want a hands-off approach. These platforms automatically build and manage a diversified portfolio based on your goals and risk tolerance.
They can simplify investing, though management fees may be higher than building a basic portfolio yourself with low-cost index funds.
Benefits of investing for kids
Investing early offers several long-term advantages for kids, from financial growth to life skills development.
More time for compound growth. The biggest benefit of investing for kids is time. Starting young gives money more years to compound, which can make a surprisingly large difference over the long run.
Early financial education. Investing can help kids understand saving, patience, risk and long-term planning. Those lessons can stick with them well beyond childhood.
Building lifelong habits. Kids who grow up seeing money invested regularly may be more likely to build strong saving and investing habits as adults.
Common mistakes to avoid
While investing for kids offers great opportunities, parents should avoid some common pitfalls:
Overcomplicating the strategy. You usually don’t need a complicated portfolio for a child. A simple, diversified approach is often the better choice.
Ignoring fees. Monthly platform charges, account fees and fund expense ratios can all eat into long-term returns, especially when balances are still small.
Chasing short-term gains. Trying to jump in and out of trendy investments can add unnecessary risk. Kids generally benefit more from a long-term approach than from constant trading.
Choosing the wrong account for the goal. A 529 plan, Roth IRA and custodial brokerage account can all be useful, but they are built for different purposes. Matching the account to the goal matters.
Bottom line
Investing for kids can be one of the smartest long-term moves a parent makes.
The right account depends on what you want the money to do. If you want flexibility, a custodial brokerage account may make the most sense. If your child has earned income, a Roth IRA can offer powerful long-term tax advantages. And if education is the main goal, a 529 plan may be the better fit.
The most important thing is to get started. Even small contributions made early have decades to grow.
Frequently asked questions
That depends on your goal. A custodial brokerage account is one of the most flexible options, while a Roth IRA can be especially powerful if your child has earned income. A 529 plan may be best if you're focused on education savings.
Yes. A child can contribute to a Roth IRA if they have eligible earned income. Contributions generally can't exceed the child's earned income or the annual IRA limit, whichever is lower.
Many parents choose a diversified index fund inside a custodial brokerage account. If the child has earned income, a Roth IRA may also be worth considering because of its tax advantages.
A custodial brokerage account is an investment account managed by an adult for a minor. The child becomes the legal owner of the assets, and control typically transfers once they reach the age of majority.
Matt Miczulski is an investments editor and market analyst at Finder. With over 450 bylines, Matt dissects and reviews brokers and investing platforms to expose perks and pain points, explores investment products and concepts and covers market news, making investing more accessible and helping readers to make informed financial decisions.
Before joining Finder in 2021, Matt covered everything from finance news and banking to debt and travel for FinanceBuzz. His expertise and analysis on investing and other financial topics has been featured on Yahoo Finance, CBS, MSN, Best Company and Consolidated Credit, among others. Matt holds a BA in history from William Paterson University.
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This guide covers eight specific investment vehicles, current 2026 IRS contribution limits, tax location strategy, and sample allocations for conservative, moderate, and aggressive risk profiles.
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