It's never too early to start investing for your kids and teaching them the concept of setting aside money for a goal. The more time you have in the market, the more your money can grow.
Below, CNBC Select breaks down the best investment accounts for kids, not including savings vehicles like certificates of deposit (CDs) or high-yield savings accounts. When it comes to choosing the right investment account, deciding first on what your goal is for your kid — investing for a college education or investing for their retirement years — can steer you in the right direction. (Seeour methodologyfor more information on how we made this list.)
Best investment accounts for kids
- Teen-owned brokerage account
- 529 college savings plan
- Coverdell education savings account
- Custodial Roth IRA
- UGMA or UTMA custodial accounts
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1. Teen-owned brokerage account
Who's this for?Brokerages have investment accounts exclusively for minors, which are ideal for parents who want their older kids to learn more actively about investing. Just note that a brokerage account in a minor's name is considered a student asset when it comes to eligibility for federal financial aid for college, which carries a heavier weight than parental assets.
Standout benefits: Teen-owned brokerage accounts are a good way to have kids learn about money hands-on while keeping an eye on their activity. For example, with the Fidelity Youth® Account, an investment account for teens 13 to 17, the teenager controls the account but parents first open it and can monitor activity, transactions and trades. There are no minimums required and no account fees, and teens can invest in most U.S. stocks, some ETFs and mutual funds.
Fidelity® Youth Account
Learn More
On Fidelity's secure site
Minimum deposit and balance
Teens aren't tied to any account minimums and there are no monthly fees
Fees
$0 commissions for online U.S. stocks*
Bonus
For a limited time: When you (parent or guardian) initiate the opening of a new Youth Account and your teen (aged 13 to 17) downloads the Fidelity Mobile®App and activates the new account, your teen will receive a $50 deposit as a reward1
Investment vehicles
Brokerage and trading: Fidelity® Youth Account
Investment options
Stocks, ETFs and mutual funds
Educational resources
Teens can access a financial curriculum made just for them to learn about saving, spending and investing
Terms apply.
Pros
- No account minimums or monthly fees
- Educational investing resources customized for young teens
- Requires parental oversight: In order for a teenager to sign up, their parent or guardian must already have an existing Fidelity account. Parents can monitor their child’s account activity and set up notification alerts for trades, transactions and spending
- Teen users get access to a free debit card with no subscription fees, no account fees, and no minimum balances
Cons
- Only available to teens aged 13 to 17
- In order to sign up as a teen, parent or guardian must already have an existing Fidelity account
*$0.00 commission applies to online U.S. equity trades and Exchange-Traded Funds (ETFs) in a Fidelity retail account only for Fidelity Brokerage Services LLC retail clients. Sell orders are subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal). Other exclusions and conditions may apply. See Fidelity.com/commissions for details. Employee equity compensation transactions and accounts managed by advisors or intermediaries through Fidelity Clearing & Custody Solutions® are subject to different commission schedules.
The Fidelity Youth Account can only be opened by a parent/guardian. Account eligibility limited to teens aged 13-17.
1Limited Time Offer. Terms Apply. Before opening a Fidelity Youth Account, you should carefully read the account agreement and ensure that you fully understand your responsibilities to monitor and supervise your teen's activity in the account.
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2. 529 college savings plan
Who's this for?A 529 college savings plan is popular among parents who want to start investing in their kids' educational future. 529s are state-sponsored education savings accounts where parents, relatives or friends can make after-tax contributions. 529 earnings grow tax-free and withdrawals are tax-free if used for qualified college educational expenses (tuition, room and board, books and tech equipment, etc). You don't have to live in the state of the 529 plan you choose.
Standout benefits: If your child assigned to the 529 plan doesn't end up needing the funds for college, you have options you can transfer the plan to another child, a grandchild or use it for your own qualified educational needs. You can also roll over the unused 529 funds to the same beneficiary's Roth IRA, untaxed and unpenalized, up to $35,000. Note that rules vary from state to state.
Although 529 contributions are not federally tax deductible, if you choose the 529 plan your state offers, you could get tax benefits as a resident. Here are some 529 plans that reward their residents:
my529 (Utah)
Information about my529 has been collected independently by CNBC Select and has not been reviewed or provided by the issuer prior to publication.
Minimum opening balance
None
Maximum overall contribution
$540,000
Portfolio options
4 age-based options with various risk tolerance, which automatically rebalances each year; 10 static options based on risk tolerance and U.S. stocks and bonds (investors will need to manually change their allocations); 2 customizable options (either age- or static-based)
Underlying funds
Investors can choose from Dimensional Fund Advisors mutual funds, PIMCO Interest Income Fund, Vanguard Group funds and FDIC-insured accounts from Sallie Mae Bank and U.S. Bank
Fees and expenses
Total asset-based expense ratio: 0.131% to 0.136% for my529 target-date options; 0.130% to 0.455% for customized static and age-based options, depending on investment mix; 0.211% for stable value option
Terms apply.
Pros
- Available to residents of any state
- Offers low fees
- Diverse investment options
- Tax benefits for residents
- No minimums
- Offers online tool to share gift contribution link with family and friends
Cons
- Expense ratios may be higher compared to other providers on our list
Bright Start College Savings (Illinois)
Information about Bright Start College Savings has been collected independently by CNBC Select and has not been reviewed or provided by the issuer prior to publication.
Minimum opening balance
None
Maximum overall contribution
$500,000
Portfolio options
Choose from age-based, target (based on risk tolerance and/or fixed-asset allocation) and individual fund portfolios
Underlying funds
Investors can choose from 11 funds including ones through DFA, Dodge & Cox, T. Rowe Price and Vanguard
Fees and expenses
Total asset-based expense ratio: 0.07% to 0.79%
Terms apply.
Pros
- Available to residents of any state
- Offers low fees
- Diverse investment options
- Tax benefits for residents
- No minimums
- Offers online tool to share gift contribution link with family and friends
- Offers risk tolerance questionnaire to help investors looking for some guidance
Cons
- Expense ratios may be higher compared to other providers on our list
- Performance is lower than others on list
CollegeAdvantage (Ohio)
Information about CollegeAdvantage has been collected independently by CNBC Select and has not been reviewed or provided by the issuer prior to publication.
Minimum opening balance
$25
Maximum overall contribution
$523,000
Portfolio options
Choose from age-based, risk-based, DIY options and FDIC-insured accounts
Underlying funds
Age- and risk-based portfolios from Vanguard; individual options includes ones from Dimensional Fund Advisors and Vanguard
Fees and expenses
Total asset-based expense ratio: 0.145% to 0.435%
Terms apply.
Pros
- Available to residents of any state
- Offers low fees
- Diverse investment options
- Tax benefits for residents
Cons
- Minimum opening balance, but it’s low
- Performance is lower than others on list
- Doesn’t offer online gifting portal for easy sharing (may offer gift cards or allow mail gift contributions)
Michigan Education Savings Program (MESP)
Information about Michigan Education Savings Program (MESP) has been collected independently by CNBC Select and has not been reviewed or provided by the issuer prior to publication.
Minimum opening balance
$25, or $15 per pay period via payroll deduction
Maximum overall contribution
$500,000
Portfolio options
Investors can choose from enrollment year-based, multi-fund investments, single funds or the guaranteed fund option
Underlying funds
A mix of funds from Schwab, TIAA-CREF and Vanguard
Fees and expenses
Total asset-based expense ratio: 0.065% to 0.185%
Terms apply.
Pros
- Available to residents of any state
- Offers low fees
- Diverse investment options
- Tax benefits for residents
- Offers gifting platform where givers can save their profile for future contributions
Cons
- Minimum opening balance, but it’s low
- Performance is lower than others on list
Invest529 (Virginia)
Information about Invest529 has been collected independently by CNBC Select and has not been reviewed or provided by the issuer prior to publication.
Minimum opening balance
$10
Maximum overall contribution
$550,000
Portfolio options
Options include target enrollment portfolios (also known as age-based portfolios), index portfolios, target risk portfolios, principal protected portfolios and specialty portfolios
Underlying funds
Investors can choose funds from Vanguard, Invesco, Blackstone, UBS and more
Fees and expenses
Total asset-based expense ratio: 0.0% to 0.569%
Terms apply.
Pros
- Available to residents of any state
- Offers low fees
- Diverse investment options
- Tax benefits for residents
Cons
- Minimum opening balance, but it's low
- Expense ratios may be higher compared to other providers on our list
- Doesn't offer online gifting portal for easy sharing
New York's 529 College Savings Program
Information about New York's 529 College Savings Program has been collected independently by CNBC Select and has not been reviewed or provided by the issuer prior to publication.
Minimum opening balance
None
Maximum overall contribution
$520,000
Portfolio options
Options include age-based options and individual options
Underlying funds
Investors can choose funds from Vanguard mutual funds
Fees and expenses
Total asset-based expense ratio: 0.12%
Terms apply.
Pros
- Available to residents of any state
- Offers low fees
- Diverse investment options
- Tax benefits for residents
- No minimum contribution to start
- Offers gifting platform that allows gift-givers to save profile for recurring or future contributions
Cons
- Performance is lower than others on list
Fidelity U.Fund College Investing Plan (Massachusetts)
Information about U.Fund College Investing Plan has been collected independently by CNBC Select and has not been reviewed or provided by the issuer prior to publication.
Minimum opening balance
No minimum to open account; minimum contribution level is $15 per month (or $45 per quarter) with automatic investment plan
Maximum overall contribution
$500,000
Portfolio options
Options include age-based options and static options, as well as an interest-bearing deposit account
Underlying funds
Investors can choose funds from Fidelity Investments; interest-bearing deposit account is Wells Fargo
Fees and expenses
Total asset-based expense ratio: 0.11% to 0.95%
Terms apply.
Pros
- Available to residents of any state
- Offers low fees
- Diverse investment options
- Tax benefits for residents
- No minimum deposit to open account
- Offers online tool to share gift contribution link with family and friends
Cons
- Minimum contribution amount with automatic plan, but it’s low
- Expense ratios may be higher compared to other providers on our list
- Performance is lower than others on list
3. Coverdell education savings account
Who's this for?A Coverdell education savings account (Coverdell ESA) is another tax-advantaged way to invest in your kid's education, but unlike a 529 plan, there are income limits on who's eligible. The income limit for married couples filing jointly is $220,000 modified adjusted gross income (MAGI) and $110,000 MAGI for single filers. Contributions are not tax-deductible, but your money grows tax-free and withdrawals are tax-free as long as it's used for qualified education expenses (tuition, books, supplies, uniforms, tutoring, etc) for kindergarten through college schooling.
Standout benefits: Coverdell ESAs stand out for their ability to be used for virtually all levels of education, starting at kindergarten. They also are easily accessible, as parents can open an account at a bank, credit union or brokerage, and investment choices are expansive, including individual stocks, bonds, mutual funds, real estate investment trusts, ETFs, etc.
4. Custodial Roth IRA
Who's this for?A custodial Roth IRA is a tax-advantaged retirement account that an adult (often a parent) opens and manages for a kid, so this investment option is for those who want to start building a nest egg early on for their child. Custodial Roth IRAs require that the beneficiary on the account (i.e. your kid) has earned income, so it's ideal for families with an older kid with a part-time job like babysitting.
Standout benefits: As with a normal Roth IRA, a custodial Roth IRA's contributions are already taxed, so there's tax-free growth, and contributions (not investment gains) can be withdrawn at any time, penalty- and tax-free. You can withdraw your earnings early, too, with no 10% penalty tax for qualifying exceptions like birth/adoption, higher education or a first-time home purchase. Once the kid turns 18 or 21, depending on the state, they take over the custodian as the account holder.
5. UGMA or UTMA custodial accounts
Who's this for?A custodial account is a brokerage account adults can open on behalf of a kid and manage until they're 18 to 25, depending on the state. Once the kid is a legal adult, they take over the account and choose how to use the funds. The two types of custodial accounts available fall under the Uniform Gift to Minors Act (UGMA) and the Uniform Transfer to Minors Act (UTMA). These investment accounts are for adults who want kids to have the most flexibility in using their funds — with neither account making users earmark the funds for retirement or education, or anything else for that matter. Contributions are not tax deductible and anyone can contribute to the custodial account.
Note that because the investment assets held in these accounts are in the minor's name, they show up as a student asset when it comes to eligibility for federal financial aid for college, which carries a heavier weight than parental assets.
Standout benefits: Money in UGMA or UTMA custodial accounts can be used for anything. In addition to this flexibility, there are no contribution or income limits, so anyone can take advantage. While both UGMA and UTMA accounts allow you to invest in cash, stocks and bonds, only UTMA accounts offer more variety with the addition of real estate assets as well.
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More on our top investment accounts for kids
| Account type | Contribution limit | Use | Investment options |
|---|---|---|---|
| Brokerage account | None | Funds can be used for anything | Mutual funds, stocks, ETFs |
| 529 college savings plan | Varies by state plan, but limits are typically high enough to cover the entire cost of college | Funds can be used for college; as well as for public, private or religious elementary through high school tuition (up to $10,000 per year per beneficiary), depending on the state's plan | Typically more limited, mainly ETFs and mutual funds |
| Coverdell education savings account | Maximum is $2,000 per year per beneficiary, but that limit phases out for MAGI between $190,000 and $220,000 for joint filers, and for MAGI between $95,000 and $110,000 for single filers | Funds can be used for college; as well as for public, private or religious elementary through high school tuition (no limit) | More extensive, including individual stocks, bonds, mutual funds, REITs, ETFs |
| Custodial Roth IRA | In 2024, $7,000 or the child's earned income amount, whichever is less | Funds are earmarked for retirement, but contributions can be withdrawn at any time, penalty- and tax-free; earnings can be withdrawn early penalty-free for qualifying exceptions | Broad range, including stocks, ETFs, mutual funds |
| UGMA/UTMA custodial accounts | None, but contributions are irreversible | Funds can be used for anything | Cash, stocks and bonds; for UTMA accounts only, real estate |
What kind of investment account should I open for my child?
The kind of investment account you should open for your child ideally is representative of your intended goal. If it's to grow funds for your kid's education, a 529 plan or Coverdell ESA is your best route. If it's to grow a nest egg for your kid's golden years and they currently earn income, a custodial Roth IRA is the way to go. Otherwise, UGMA or UTMA custodial accounts, as well as teen-owned brokerage accounts, allow funds to be used for anything — but with the former, the parent manages until the kid is an adult and with the latter, the kid manages so it's more hands-on.
Best place to invest a child's money
There's no one best place to invest a child's money as there are a lot of factors to consider, such as how old your kid is, their education goals, whether or not they earn any income currently, as well as your level of comfort with them managing their own investment account or receiving a wad of cash when they enter adulthood.
How to start investing as a kid
A kid can start investing by having their parent open a teen-owned brokerage account on their behalf that they then manage on their own. This gives kids direct access to buying and trading stocks, ETFs and mutual funds. A less hands-on, and more relaxed, approach would be investing in something like a custodial Roth IRA if they earn income.
FAQs
Can you set up an investment account for a child?
A parent or adult can set up an investment account for a child a few different ways, whether through a 529 plan, a Coverdell ESA, a custodial Roth IRA, a UGMA or UTMA custodial account or their own teen brokerage account.
Can you open a Roth IRA for a child?
Parents or adults can open a custodial Roth IRA for a child. Custodial Roth IRAs behave similarly to your traditional Roth IRA, as in contributions are made post-tax, there's tax-free growth and contributions (not investment gains) can be withdrawn at any time, penalty- and tax-free. The child then becomes the account holder once turning 18 or 21, depending on the state.
How can my child invest with no income?
If your child has no income, they wouldn't qualify for a custodial Roth IRA, but you could otherwise help them invest through other accounts where the adult makes contributions on the kid's behalf but it goes toward the kid.
Do I have to report my child's investment income?
Whether you have to report your child's investment income depends on how much they made and whether or not they earn any income. For tax year 2024, if your child has no earned income and their investment income is less than $1,300, it's not taxed. The next $1,300 of unearned income is taxed at the child's rate, and any amount above $2,600 is taxed at the parent's rate. Parents may be able to include their child's investment income on their own return, depending on how much they made.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every investment account review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of investment products.While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. Seeour methodologyfor more information on how we choose the best investment accounts.
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Our methodology
To determine the top investment accounts for kids, CNBC Select looked at what options parents have to begin investing with their kids. We took into account why you'd want to open an investment account for a child in the first place, such as saving for college or retirement, as well as the unique perks and different limitations that each account provides users. We also considered the educational tools that investment accounts provide for your family.
Contributions and earnings in an investment account are subject to fluctuations in the market and returns are not guaranteed. Earnings overall depend on any associated fees, your balance and the contributions you make to your investment account.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
