What Is the Best Investment Account for Kids?

Opening an investment account for your child can help teach them important lessons about saving, investing, and planning for the future. According to a 2026 family banking survey by SoFi, 82% of parents of children ages 6 to 17 said the top financial lesson they want to teach their kids is the importance of saving money.

Starting early can also give investments more time to potentially grow. Because children typically have many years before they need the money, their savings may benefit from compounding returns over a long period. This can be especially helpful when saving for goals such as college, a first home, or long-term financial security.

There are several types of investments designed for children. The best investment account for kids depends on your goals, your child’s age, and how you intend the money to be used. Here’s a closer look at some of the most common options.

Why You Should Open a Child Investment Account

One of the biggest advantages children have as investors is time. Starting early gives investments years — or even decades — to potentially grow. A longer time horizon may help investors ride out market fluctuations and potentially benefit from compound growth, which occurs when earnings generate additional earnings over time.

Some accounts also offer tax advantages. For example, certain college savings plans allow investments to grow tax-free and provide tax-free withdrawals when funds are used for qualified education expenses. Custodial accounts may also receive favorable tax treatment on a portion of investment earnings, subject to IRS rules.

Beyond potential financial benefits, investment accounts for kids can create valuable teaching opportunities. Whether you’re building an investment plan on your child’s behalf or helping a teenager choose investments in their own account, these conversations can help them learn about risk, diversification, long-term planning, and the importance of saving consistently.

Types of Investment Accounts for Kids

There are a number of investment accounts available for children. Each comes with different rules, tax treatment, and levels of parental control.

Custodial Accounts (UGMA and UTMA)

A custodial account is a savings or an investment account that an adult manages on behalf of a minor. The account belongs to the child, but the adult custodian oversees it until the child reaches the age of majority, which varies by state.

Two common types custodial accounts are established under the Uniform Gift to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA).

A UGMA account can hold financial assets such as cash, stocks, bonds, exchange-traded funds (ETFs), and mutual funds. There are no annual contribution limits, although large contributions may be subject to federal gift tax rules. For 2026, the annual gift tax exclusion is $19,000 per person or $38,000 for a married couple.

Earnings can grow in the account tax-free up to $1,350 for 2026. Anything over that is taxed at the child’s tax rate. Once total earnings reach $2,700 (for 2026), they are taxed at the parent’s tax rate.

A UTMA works similarly but may also hold certain non-financial assets, such as artwork, jewelry, real estate, or other property. UTMA accounts are not available in every state.

529 College Savings Plans

A 529 plan is a tax-advantaged account designed to help save for education expenses. Investment earnings grow tax-free, and withdrawals are generally tax-free when used for qualified education expenses. Eligible expenses may include tuition for certain K-12 schools, approved apprenticeship programs, trade schools, colleges, and limited student loan repayment.

529 college savings plans are sponsored by states and every state offers at least one plan. You can generally open a plan in any state, regardless of where you live. However, some states offer tax deductions or credits for contributions to their own plans.

Unlike custodial accounts, the account owner — typically a parent or grandparent — maintains control of the assets even after the child becomes an adult.

Custodial Roth IRAs

If your child has earned income, you can invest for your kids by setting up a custodial Roth IRA on their behalf. The account operates much like a standard Roth IRA. Contributions are made with after-tax dollars, investments grow tax-free, and qualified withdrawals in retirement are tax-free.

For 2026, the Roth IRA contribution limit is $7,500. However, contributions cannot exceed the child’s earned income for the year. For example, if your child earns $3,000 babysitting or mowing lawns for the year, the maximum contribution would be $3,000.

Because retirement may be decades away, even relatively small contributions made during childhood could have significant tim to potentially grow. Once the child reaches adulthood, control of the account transfers to them.

Brokerage Accounts for Kids

Some brokerage firms offer investing accounts specifically designed for teenagers.

One option that may be offered is a joint brokerage account shared by a parent and child. The parent initiates the opening of the account and has full visibility and authority over the funds. However, both the parent and the teen can view, deposit, and trade within the account, encouraging hands-on learning.

Other firms offer youth brokerage accounts that are owned and managed by the teen, although a parent must help open the account and can generally monitor activity. These accounts allow teens to save, research investments, and gain practical experience investing while still benefiting from parental guidance.

A kids brokerage account can be a valuable tool for teaching kids about investing, including concepts such as diversification, risk and reward, market volatility, and the importance of long-term investing.

How to Open an Investment Account for a Minor

Opening an investment account for a child is often a straightforward process that can be completed online.

Choose the right account type: Consider your goals and your child’s age. If you’re primarily saving for college, a 529 plan may make sense. If your child has earned income, a custodial Roth IRA could be an option. If your goal is general investing and financial education, a custodial account or teen brokerage account may be appropriate.

Select a financial institution: Banks, brokerages, and investment companies offer different account types. It’s a good idea to compare fees, investment choices, educational resources, and parental oversight features before choosing a provider.

Gather required information: You’ll typically need personal information for both yourself and your child, including Social Security numbers, dates of birth, addresses, and contact information. You may also need bank account information to fund the account.

Fund the account and choose investments: After opening the account, you can transfer money into it and select investments. Depending on the account type, available investments may include stocks, mutual funds, index funds and exchange-traded funds (ETFs). Involving your child in the process can help turn investing into a valuable learning experience.

What to Look for in a Kid’s Investment Account

The best investment account for your child depends on your financial goals and how much flexibility you want the funds to have.

If college savings is a priority, you may want to consider how different account types might affect financial aid eligibility. Assets held in a child’s custodial account are generally treated differently than assets held in a parent-owned 529 plan, which may result in different financial aid outcomes.

You may also want to evaluate the tax treatment of each child account, contribution rules, withdrawal restrictions, and who controls the money once the child becomes an adult.

Finally, you might think about the educational value of the account. Some options are designed primarily for saving, while others allow children and teens to gain hands-on experience with investing.

Understanding the Invest in America Act

The Invest in America Act, part of the “One Big Beautiful Bill” passed by Congress in 2025, established tax-advantaged investment accounts to encourage long-term saving and investing for children. Known as “Trump Accounts,” they function as custodial accounts and can be opened by a child’s parents starting in mid-2026.

Anyone can contribute money to the account, including parents, grandparents, other relatives, friends, and even a parent’s employer (up to $5,000 per year) until the child turns 18. Employers may contribute up to $2,500 per year. Once the child turns 18, the annual contribution limit increases to match the current IRA limit, which is currently $7,500 for people under age 50.

Distributions are not permitted until the account holder turns 18. At that point, the child takes control of the account and it becomes subject to traditional IRA rules. Early withdrawals (before age 59 ½) may incur taxes and a 10% penalty unless an exception applies (such as the money being used for college).

As part of a pilot program, the federal government will deposit $1,000 into the “Trump account” of every child born between January 1, 2025 and December 31, 2028.

The Takeaway

An investment account can help children learn valuable money management skills while giving their savings time to potentially grow. Whether you’re saving for college, helping a teen learn about investing, or building long-term security for a child, there are several account types to consider.

Options such as custodial accounts, 529 plans, custodial Roth IRAs, and teen brokerage accounts each offer different benefits and tradeoffs. Choosing the right account depends on your goals, your child’s age, and how you want the money to be used in the future.

FAQ

Can I open a brokerage account for my child?

Yes, parents can generally open a custodial brokerage account for a minor child. Some brokerage firms also offer youth investing accounts for teens, allowing them to manage investments while a parent maintains oversight. The specific account options, age requirements, and features vary by financial institution.

What is the best age to start investing for a kid?

The best age to start investing for a kid is often as early as possible. Starting early gives investments more time to potentially benefit from compound growth. Even small contributions made during childhood may have decades to potentially grow before the money is needed.

Can a minor manage their own investment account?

Some brokerages offer youth investing accounts for teens, typically ages 13 to 17. While a parent usually must help open the account and can monitor activity, the teen can often make investment decisions and manage the account themselves.

Do kids pay taxes on their investment accounts?

It depends on the account type. Earnings in 529 plans and Roth IRAs can receive favorable tax treatment if certain rules are met. Earnings in custodial accounts may be subject to the “kiddie tax,” under which some investment income may be taxed at the child’s rate and above certain thresholds, at the parent’s rate.

What happens to a custodial account at age 18?

When a child reaches the age of majority — typically 18, 21, or, in some states, up to 25 — control of the custodial account transfers to them. At that point, they can generally use the assets for any purpose.

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