Edited by As parents, we have several investment account options to help our kids build wealth. These investment accounts for kids provide financial benefits and powerful teaching tools about saving, investing and financial responsibility. The choices can seem overwhelming, from custodial accounts that transfer to your child at adulthood to education-specific savings plans like 529s. Each option comes with its own set of rules regarding contributions, tax advantages and withdrawal restrictions.
Working with a financial advisor can help you tailor a strategy that’s right for you, and for your family. Here are some of the most popular options.
1. 529 Savings Plans
529 savings plans are state-sponsored investment accounts designed to help families save for education expenses. Your contributions grow tax-free, and withdrawals remain tax-free when used for qualified education expenses. The flexibility of these plans makes them an attractive option for many parents planning for their children’s educational future.
Unlike some other investment accounts for minors, 529 plans keep parents firmly in control as account owners. This arrangement means your child cannot access the funds independently or decide to use the money for non-educational purposes. You maintain the ability to change beneficiaries if needed, potentially redirecting unused funds to another child or family member.
2. Roth IRAs
Roth IRAs offer a powerful investment account for kids with significant tax advantages. Unlike traditional IRAs, contributions to Roth IRAs are made with after-tax dollars, but qualified withdrawals in retirement are completely tax-free. This structure can be especially beneficial for young people who have decades of potential tax-free growth ahead of them.
For a child to qualify for a Roth IRA, they must have earned income from a job or self-employment. This could include babysitting, lawn mowing, or a part-time job. The contribution limit is either the child’s total earned income for the year or the annual IRA limit ($7,000 in 2025), whichever is lower.
3. Custodial Brokerage Accounts
A custodial brokerage account allows adults to manage investments on behalf of a minor until the child reaches the age of majority, usually 18 or 21. These accounts are established under either the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA), depending on your state.
When you open a custodial brokerage account for your child, you can invest in a wide range of assets, including stocks, bonds, mutual funds and ETFs. All contributions to the account are irrevocable gifts, meaning once assets are placed in the account, they legally belong to the minor.
4. ABLE Savings Accounts
ABLE (Achieving a Better Life Experience) savings accounts offer families with special needs children a powerful financial tool. These tax-advantaged accounts allow families to save for disability-related expenses without jeopardizing eligibility for critical government benefits like Medicaid and Supplemental Security Income (SSI). The 2014 ABLE Act created this opportunity for families to build financial security while maintaining access to essential support services.
To qualify for an ABLE account, the beneficiary must have developed a disability before age 26. The individual must also meet Social Security’s criteria for disability or blindness, or have a written diagnosis from a physician confirming a qualifying condition. Each eligible person can have only one ABLE account, but multiple people can contribute to it.
5. Investment Trading Accounts
When your child is ready to take a more active role in investing, investment trading accounts offer an excellent opportunity for hands-on learning. These accounts allow young investors to buy and sell securities while gaining practical experience in the financial markets under adult supervision.
Several brokerages now offer specialized platforms designed specifically for teens to learn about investment account options for kids. Companies like Fidelity and Charles Schwab provide youth accounts that allow teenagers to trade stocks and ETFs with parental oversight. These platforms often include educational resources tailored to young investors.
How to Open an Investment Account for Your Kids
To open an investment account for your kids, you’ll need specific documentation. This typically includes your child’s Social Security number, your identification, and possibly birth certificates. Look for providers with low fees, educational resources for young investors, and user-friendly interfaces. Many traditional brokerages, online platforms and banks now offer specialized accounts designed specifically for minors.
Some platforms may require an initial deposit, though many have eliminated minimum investment requirements to make investing more accessible to families. Consider establishing automatic transfers from your bank account to your child’s investment account. Even small regular contributions can grow significantly over time thanks to compound interest. This approach also helps instill consistent saving habits that your child can observe and eventually practice themselves.
Bottom Line
When considering investment account options for your kids, remember that each type offers unique advantages. The right choice depends on your family’s specific goals, whether you’re saving for college, teaching financial responsibility or helping your child build long-term wealth. By starting early and choosing the appropriate investment vehicle, you’re not just growing their financial assets—you’re nurturing essential life skills that will benefit them for decades.
Tips for Investing
- A financial advisor can help you with the investments throughout your portfolio, even helping you create a long-term financial plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you want to estimate how your portfolio might be impacted by a single opportunity, consider using an investment calculator.
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