How to Invest for Kids: 6 Best Investing Accounts

Helping your kid open an investment account can teach them valuable lessons about money and the power of investment growth.

One of the biggest keys to successful investing is a long time horizon for your money to grow — and kids have a lot of time on their side. If they're willing to let their money remain invested for several years, they're likely to see a nice return on their initial investment. Seeing their money grow can encourage them to be good savers and investors as adults.

Whether it's your kid, grandchild or a friend or family member, here are six types of accounts to get kids started investing.

1. Custodial brokerage accounts

How it works: A custodial account is a specific type of financial account that is established on behalf of a child and managed by an adult. Although the account will initially be in your name, the child will automatically take complete control once they reach age 18 or 21, depending on state laws.

Types: The two main custodial accounts are often referred to as UGMA or UTMA accounts. The difference comes down to what assets can be added to each type of account. A UGMA account allows for financial assets such as stocks, bonds and liquid cash, whereas UTMA accounts are broader, allowing for the addition of property, jewelry and other tangibles.

Contribution limits: No limits, but contributions can be subject to gift tax rules if they exceed the yearly gifting limit.

Eligibility: Custodians can open the account for minors below the age of 18 or 21 (varies depending on the state).

2. Roth IRAs

How it works: A custodial Roth IRA is an investment account owned by a child with earned income but controlled by their parent or guardian until the child is able to take official ownership of the account as an adult. The account functions identically to a standard Roth IRA and follows the same rules.

Types: A Roth IRA, in particular, is ideal for children, as your child's contributions to the account will grow tax-free and can be pulled out at any time. The investment growth portion can generally only be used for retirement, but it can also be tapped for specific qualified purposes such as a first-home purchase or higher education expenses.

Contribution limits: The contribution limit for 2025 is $7,000 for those under the age of 50.

Eligibility: There is no minimum age requirement. However, your children must have earned income. This can be from a part-time job, such as babysitting, raking leaves or a similar activity.

3. 529 savings and investing accounts

How it works: If saving for a child’s education is the goal, a 529 account is tax-advantaged for education expenses. Investments grow tax-free and can be withdrawn for qualified expenses like textbooks, tuition, and room and board. Most 529 accounts come with a curated list of investment options, such as target-date funds, which are mutual funds that automatically adjust how much risk they take as the target date — in this case, your child's college age — approaches. Some states also offer tax deductions for contributions up to a certain limit.

Types: 529 accounts typically come in two forms — the general 529 college savings plan and prepaid plans. The prepaid plan is usually favored by individuals who want to lock in the tuition price at a local or in-state public school by pre-paying part or all of the tuition. The general 529 savings plan is the more popular type, as it offers greater flexibility in how you can use the funds for qualified expenses.

Contribution limits: There is no federal limit, but states impose their own annual contribution maximums (see 529 contribution limits by state here). Importantly, money you contribute to a 529 plan is considered a gift, so that means if you contribute more than the annual limit, you may need to file a gift tax return.

Eligibility: Anyone can open a 529 account on behalf of a beneficiary.

4. Stock trading accounts

How it works: If your teen asks about stock trading, your mind might go to investment apps that are popular with younger generations (such as Robinhood and Webull). However, these often don't offer investment accounts for kids. Some brokerages are filling in the gap by offering new account types explicitly geared for teens who want to learn to trade investments

Types: Check to see if your chosen brokerage offers this type of program. Fidelity, for example, has a Youth Account, which lets teens ages 13 to 17 control the account but lets parents monitor its activity, trades and transactions, complete with alerts. Once they’re of age, they can decide whether to continue with the same brokerage by transferring the assets to a standard account.

If your child is interested in trading but doesn't have money to invest — or doesn't want to risk the money they do have — you might consider pointing them toward a broker that offers paper trading accounts. These allow investors to practice trading stocks or other investments with fake money.

Eligibility: Rules and terms will vary by provider.

5. ABLE accounts

How it works: An ABLE savings account, named for Achieving a Better Life Experience, is a type of 529A account that allows individuals with a disability to save money and wages without losing public benefits^[0]

Types and eligibility: ABLE accounts are typically available through state plans to people with a disability that began before the age of 26. (Beginning in 2026, the age limit will increase to 46.). Eligibility also depends on whether the person is receiving Social Security Insurance and/or whether their disability meets certain diagnostic criteria. The ABLE National Resource Center can help you determine if you meet the requirements, as well as how to find and vet a state ABLE plan.

Contribution limits: The contribution limit for an ABLE account is $19,000 in 2025 — the same amount as the annual gift tax limit. ABLE account owners who work but do not contribute to an employer-sponsored plan, such as a 401(k), can contribute an additional $15,060, with some states providing even higher contribution limits^[0]

6. Special needs trusts

How it works: A special needs trust (SNT) is another way someone with a disability can receive financial support without jeopardizing income-tested government benefits. Someone — usually a parent or guardian — sets up, funds and invests this type of trust, which the beneficiary will inherit. Some special needs trusts can also be funded by the beneficiary.

Types and eligibility: There are several types of special needs trusts, including third-party, first-party and pooled trusts. The type of trust that makes sense for you depends on how it’s funded, how access to the funds is determined, as well as other factors.

Contribution limits: There are generally no limits, but there are costs associated with setting up and managing SNTs.

How to open an investing account for kids

1. Decide on an account type

To get your kid started investing, you should first decide which investment account is best for them. The most common choices are outlined above; the ultimate decision largely hinges on two main factors: whether they have earned income and whether they have a disability. If the answer to both those questions is no, you're likely looking at a custodial brokerage account or a 529 (if the goal is building a college fund).

2. Choose the right broker

No matter which type of brokerage account you decide to open for your kids, you'll need to start by finding a broker that offers that account. The best investment accounts for kids charge no account fees and have no minimum initial deposit. This allows your kids to start investing with a small amount of money.

Consider the costs associated with the investments your child plans to choose. For example, you should ensure the broker charges no trade commissions for kids who want to practice trading stocks.

Among the brokerage firms we review, the following make our list for the best custodial accounts:

3. Open the account

You can open a custodial account — both a standard brokerage account and a Roth IRA — for your child in under 15 minutes or so. You can complete the entire process online with most brokers.

To speed things up, make sure you have the necessary information ready. The broker will likely ask for your and your child's Social Security number, dates of birth and contact information.

4. Fund the account

Even though you've opened the account, you'll need to fund it before you can start choosing investments. To fund it, link another bank or brokerage account so you can transfer money into the new account. You may also need to supply your employment or other personal information.

Brokers increasingly rely on third parties to connect your new account with an existing one, which speeds up the process. For those who don't use these services, you may need to confirm that a deposit in your bank account (often two separate transactions of a few cents each) came from the broker, which can take several days.

5. Help your kid decide what to invest in

Once the custodial account is open and funded, the real fun begins: Investing the money. Typically, you can invest in individual stocks, mutual funds, index funds and exchange-traded funds within a brokerage account. To get kids excited about investing, you might consider a two-pronged approach:

• Help them pick one or two individual stocks. Focus on household names they're familiar with — owning even one share of a brand kids recognize will get them excited about investing.

• Build the rest of the portfolio with index funds. As your child continues to add money to the investment account, consider skipping additional shares of individual stocks and instead focusing on low-cost index funds or ETFs. These funds bring much-needed diversification to the portfolio by pooling hundreds of stocks into one investment. That way, your child can invest in many companies in one transaction for one price.

Once they've selected and purchased their investments, check their earnings and losses every few weeks and compare the small fluctuations with the more significant long-term changes shown on their quarterly statements. This can spark discussion and inspire kids to become more informed investors.