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investment strategy

How to Open an Investment Account For a Child

To open an investment account for kids, an adult must serve as the custodian. Here’s what you need to know about opening a custodial account.

Last updated:

November 17, 2022

EarlyBird helps parents, family, and friends collectively invest in a child’s financial future. Learn more.

What You'll Learn

Investing your time, energy, and love in children is vital for their development and well-being. But investing your money can also be incredibly impactful.

Investing early gives your money more time to grow. Every $1 that is invested for 65 years earning 10% returns will turn into over $490. That means that a single $1,000 investment for a newborn baby would be worth around $490,000 once that child reaches retirement age.

But investing for children is a bit different than investing for yourself. A minor cannot open a standard brokerage account. Instead, an adult must open one for them.

This comprehensive guide will cover how to open an investment account for a child — including information on account types, where to open, what information is needed, and more.


What Is an Investment Account for Children?

An investment account for children is a digital account that allows parents and loved ones to invest on behalf of children. The accounts make it possible to invest in stocks, bonds, ETFs, and potentially other assets, as well.

Father carrying child

There are different types of accounts, but each typically must be set up and managed by an adult.

Children generally cannot open their own investment accounts until they become legal adults. Instead, an adult must open the account on behalf of the child. The child becomes the “beneficiary” of the account, while the adult is the “custodian.”

These special types of investment accounts are called custodial accounts.

To open an investment account for a child, an adult must be involved. The adult must open the account, select the investments, manage tax reporting, and continue to manage the account until the child reaches the age of majority. This is usually at age 18 but could be age 21 in select states.

With a custodial account, the child always owns the account — but they won’t actually have control over it until they reach the age of majority.

How to Open an Investment Account For a Child

A legal adult must be involved to open investment accounts for kids. In most cases, this doesn’t necessarily need to be the parent — other family members and trusted friends can also typically serve as the account custodian.

To open a children’s investment account, here are the basic steps:

  1. Select an account type. This could be a college savings account like a 529, a general-purpose investment account like a UGMA account, or even a retirement account like a Roth IRA.
  1. Choose where to open the account. Once you know the account type you want, look for stockbrokers and financial services companies that offer that account style. Pay attention to the company’s reputation/reviews, the fees it charges, and the investment options it offers inside the relevant account type.
  1. Gather information. To open a custodial investment account for a kid, the adult will need the child’s information as well as their own. Names, addresses, and Social Security numbers will be required.
  1. Open the account. Now you’re ready to actually open the account. Each company will have a slightly different way of doing this (and we’ll walk through what that usually looks like in more detail later on), but the company’s signup process should take you through the required steps.
  1. Start investing. Now, it’s time to actually start investing. Investors could choose stocks, bonds, mutual funds, ETFs, or any mix of assets. The custodian is responsible for making any investment decisions.

The child can certainly be involved in decision-making if it’s age-appropriate — but ultimately, the custodian must make the investment selections and trades. We’ll give you an overview of the most common investment asset classes below.

What Types of Investment Accounts Can I Open For a Child?

Not all account types are open to children. Here’s an overview of some of the best types of accounts.

529 vs custodial
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UGMA/UTMA custodial accounts — the most versatile

UGMA or UTMA accounts are two similar types of general-purpose custodial investment accounts. With these, the custodian opens and manages the account until the child reaches the age of majority.

Once the child becomes an adult, they gain full access to the account and can use the money for any purpose. Read about the differences between UGMA and UTMA accounts here.

529 plans — the most tax benefits (if used for college)

529 accounts are specialized savings accounts designed to help families save for college. They offer tax benefits if funds are used for qualifying educational expenses.

Money that is put in a 529 can be invested and grow tax-free until withdrawal. Neither you nor the beneficiary will owe any capital gains tax if the funds are used for qualifying educational expenses.

The downside is that there are penalties if funds are used for anything other than education. For this reason, UGMA custodial accounts are more versatile than 529 accounts.

Coverdell ESA — another option for college savings

Coverdell Education Savings Accounts (ESAs) are another way to save for college. They offer tax-free growth as long as the funds are used for qualifying education expenses.

However, ESAs have lower contribution limits than 529s — you can only put up to $2,000 per year into an ESA. Plus, there are income limits, so higher-income families may not be able to contribute. Read about the differences between 529s and ESAs here.

Custodial Roth IRA — a good option for retirement savings

Custodial Roth IRAs are a type of retirement savings account that offers tax-free growth. However, funds are designed to be kept in the account until retirement age, and there may be penalties if money is withdrawn early.

To contribute to an IRA, the child must have earned income from a job or business. Only earned income can be contributed — allowances and gift money does not count.

Overwhelmed by options? The UGMA custodial account is the simplest and most versatile option. It has no restrictions on what the money can be used for, making it the most flexible choice.

Where Should I Open the Account?

Once you select the type of account, your next step is to select a company to actually open that account with. This could be traditional brokers like Fidelity or Vanguard or more modern financial services companies like EarlyBird. Even some banks and credit unions may offer certain types of custodial investment accounts.

Here’s what to consider when selecting a provider for the new account:

Available account types: Does the company support the specific account type that you want to open?

Reputation: Does the company have a good reputation? You can check customer reviews to be sure.

Investment options: What can you actually invest in once you have the account opened? Some companies offer a wide range of investments, while others may be quite limited.

Fees: What fees does the company charge? This could include initial fees to set up the account, monthly service charges, trading/transaction fees, or fees associated with the specific investment products/funds.

Ease of use: Are the company’s services simple to use? Is there a smartphone app, and if so, is it well rated?

Looking for a simple and trusted place to open a child’s investment account? EarlyBird may be exactly what you’re looking for.

EarlyBird is a modern investing app and service that lets loved ones set up UGMA custodial accounts for children. Account setup takes just a few minutes.

EarlyBird investment account for a child

Adults can collectively invest in the children they love by sending gifts directly to the child’s EarlyBird account.

No investing experience is required. When you sign up, you’ll answer a few questions about your investment goals and risk tolerance. Then, EarlyBird will recommend a prebuilt portfolio of diversified investments.

EarlyBird focuses on low-cost, simple index funds. You can invest in stocks and bonds, as well as alternative assets like cryptocurrency.

What Information Do I Need to Open a Child’s Investment Account?

Because children’s investment accounts are custodial accounts, you will need the information for both parties (custodian and beneficiary). Here’s what you’ll need:

Custodian (the adult)

  • Name
  • Address
  • Social Security number
  • Financial information
  • Bank account number and routing number (for deposits)

Beneficiary (the child)

  • Name
  • Address
  • Social Security number

Certain companies may require additional information to verify identity. For instance, you may be asked for your driver’s license number or even a scanned picture of your photo ID or passport.

The Process of Opening An Investment Account

Each broker will have a different process for account opening. But in general, here’s what it will look like:

  1. Navigate to the broker’s website
  2. Select “open an account”
  3. Select the type of account you want to open
  4. Enter personal information, names, SSNs, etc., for you (the custodian) and the child (the beneficiary)
  5. Transfer money into the account (and ideally, set up a recurring transfer for regular investments)
  6. Select investments

What Should I Invest In?

Here’s an overview of the most common assets that you can invest in. Note that not all investment options are available in all accounts. Each account type, and each broker/manager, has a different selection of available assets.

Different types of assets
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Stocks: Stocks represent fractional ownership of companies. If you buy Amazon stock, you own a very small piece of Amazon. Most people who invest in stocks do so by buying diversified index funds, which are a way to invest in hundreds of companies all at once.

Bonds: Bonds are like loans in reverse. Companies and governments sell bonds to investors and promise to pay them back — with interest — after a certain period of time. Investors can buy individual bonds or invest in bond funds that own hundreds of different bonds.

Real estate: Real estate refers to physical houses or commercial property. When it comes to investing for children, the main method would be to buy real estate investment trusts (REITs), which are like mutual funds for real estate.

Cryptocurrency: Cryptocurrency is a type of digital currency — examples include Bitcoin (BTC) and Ethereum (ETH). Crypto can be a volatile asset class, so most experts recommend keeping it a small percentage of your overall portfolio.

Prebuilt portfolios: Some investment platforms (like EarlyBird) offer a simpler approach: Prebuilt investment portfolios with diversified assets. For example, you might select a portfolio that invests 80% in stock market index funds and 20% in bond market index funds.

Deciding what to invest in depends on several factors, including:

  • Risk level: How much risk are you willing to take? Assets like stocks and cryptocurrency are higher-risk but have historically been higher-reward. Assets like bonds and cash are lower-risk, lower-reward.
Conservative to aggressive
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  • Time horizon: Is the child a newborn or a teenager? This could alter the investment strategy. For longer time horizons, a higher allocation to aggressive investments like stocks makes sense. For shorter time horizons (like a 14-year-old saving for college), a more cautious asset mix may be optimal.
  • Involvement level: Do you want to be actively involved in investment decisions or take a more passive approach? For most investors, passive strategies like investing in index funds make good financial sense.


To open an investment account for a child, you must be a legal adult. You can then open a custodial investment account and assign the child as the beneficiary. From there, you can build investment portfolios for the child and continually contribute money when you can.

The easiest way to open a new investment account for a child is to use EarlyBird. EarlyBird makes it simple for family and friends to collectively invest in the children they love. No investing experience is required.


This page contains general information and does not contain financial advice. All investments involve risk. Any hypothetical performance shown is for illustrative purposes only. Actual investment performance may be different for many reasons, including, but not limited to, market fluctuations, time horizon, taxes, and fees. Please consult a qualified financial advisor and/or tax professional for investment guidance.


EarlyBird Team

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Download EarlyBird today and start investing in your child’s tomorrow.
Download EarlyBird today and start investing in your child’s tomorrow.
Download EarlyBird today and start investing in your child’s tomorrow.
Download EarlyBird today and start investing in your child’s tomorrow.
Download EarlyBird today and start investing in your child’s tomorrow.