Can I Open a Brokerage Account for My Child? | The Motley Fool (2024)

FAQs

Can I Open a Brokerage Account for My Child? | The Motley Fool? ›

Custodial account

Because minors are not eligible to open their own brokerage accounts, parents and guardians can open and manage custodial accounts in a child's name. Teaching children about how to manage, save, invest, and spend money may help them to establish and enjoy a solid financial future.

You'll be able to transfer existing shares of stock, mutual funds or other securities from your account to the custodial account, or buy specific securities directly within the custodial account. The child will take control of the account when they hit a certain age — typically 18 or 21, depending on the state.

It is generally impossible for minors to open their own brokerage account, but custodial accounts and joint accounts allow young people to begin their investing journey with varying amounts of adult supervision.

How old does my child have to be to buy stocks? To start investing in stocks on their own, your kid will need a brokerage account, and they must be at least 18 years old to open one. They can start earlier than this, but they'll need a parent or guardian to open a custodial account for them.

Key benefits of an UGMA/UTMA

You can contribute as much as you want, but amounts above $15,000 per year ($30,000 for a married couple filing jointly) will incur federal gift tax. Anyone can open or contribute on behalf of a child. There is no penalty if account assets aren't used for college.

For children aged 13 to 17, a parent/guardian with an existing Fidelity account may open this account on their behalf. Child must have the last four digits of their Social Security number, plus one form of ID. At age 18, account will be transitioned to a retail brokerage account for free.

If you gift cash, generally there are no income tax consequences for the recipient, though there could be gift and estate tax implications to the donor. But if you give appreciated securities, the capital gains taxes can be significant. Also, note that the tax treatment varies widely depending on the recipient.

Public Provident Fund (PPF)

The Public Provident Fund is a government best investment plan for child future where the rate of interest is declared quarterly. It delivers a higher rate of interest than FD or saving accounts with a maturity period of 15 years.

Is a CD better than a savings account for a child? ›

Since CDs typically earn higher annual percentage yields (APYs) than standard saving accounts, opening a CD can help your child's savings grow faster. You might also purchase a CD to give to your child or provide a head start on paying for a first car, wedding or other big goal.

If you want to teach your child basic money management habits, a children's savings account will be better. If your goal is to save for a child's education, you'd likely be better off with a 529 plan or a Coverdell Education Savings Account.

Investing in index funds for your kids or teens is a savvy move. Index funds offer diversity without you needing a finance degree. They spread your investment across multiple companies, reducing the risk of putting all your cash in one place. Plus, they're known for steady growth over time.

A Roth IRA for a child needs to be started and managed by a parent or other adult as a custodial account. The child needs a Social Security or other tax identification number, plus earned income. The Roth IRA stays a custodial account until the child reaches the age of majority, which is 18 in most states.

Chick-fil-A is a private company and doesn't have a publicly traded stock symbol for investors to purchase. How Much Does Chick-fil-A Stock Cost? Chick-Fil-A stock is not available because they are a private company. They don't trade on a major public exchange.

$183.00. Buy one share of The Walt Disney Company stock as a gift in just 1 minute. The lucky recipient gets the cool stock certificate and becomes a real shareholder of the The Walt Disney Company entitled to annual reports, declared dividends, invites to shareholder meetings and any other shareholder perks.

You can open a custodial brokerage account at a bank or brokerage firm. A custodial account can be a great way to save on a child's behalf, or to give a financial gift. Basically, these are easy-to-open accounts used to invest in stocks, bonds, mutual funds, and more, all to give your child a better future.

Custodial account vs traditional brokerage account

You can also choose when or if to gift money to your child. Control of a custodial brokerage account, on the other hand, automatically transfers to your child at 18 or 21 depending on your state of residence. (Some states may also allow you to elect a later age.)

The age limit varies by state, but is typically between ages 18 and 24. Minor children can have an individual brokerage account, known as a custodial account, that is opened with their parent or guardian. However, minors cannot own a joint brokerage account.

The Custodian, along with the parent or legal guardian of the Minor account owner, are responsible for monitoring the total amount of contributions for any and all IRA accounts that are opened on behalf of the Minor account owner and to ensure that they do not exceed IRA contribution limits.