How to Open a Brokerage Account for a Minor
Yes, your child can become an investor. You can open a brokerage account called a custodial account for a minor, but retain control of it. And when your child reaches the age of maturity, your child can take over the account. But by learning the value of a dollar, saving and investing early on, your child can already be on the path to proper money management and financial wellness.
And you have different types of accounts to choose from a variety of brokerage firms that may offer different investment options, competitive fees, and access to human financial advisers. So let's explore your options.
Uniform Transfers to Minors Act (UTMA) Accounts
The Uniform Transfers to Minors Act (UTMA) accounts are designed to hold a variety of investment options. These may include traditional and alternative investments, such as:
stocks
bonds
mutual funds
exchange-traded funds (ETFs)
target-date funds (TDFs)
precious metals (gold, silver, etc.)
real estate
works of art
A UTMA account is relatively straightforward. You open an account through a brokerage firm and manage the investments. The assets technically belong to the minor. But they can't access these until they reach the legal age of maturity. That's usually age 18 or 21, depending on the state. You have a fiduciary duty to manage the account for the benefit of the minor.
But there are some tax rules to keep in mind. This is how the 'kiddie tax' works:
The first $1,300 is tax-free.
The next $1,300 is taxed at the child's rate (typically 10 percent).
Above $2,600, the money is taxed at the parent's marginal tax rate.
Uniform Gifts to Minors Act (UGMA) accounts are limited to holding cash, stocks, mutual funds, and insurance policies.
529 Plans
A 529 college savings plan is designed to help parents invest in their child's future college education. Contributions grow tax-free, and withdrawals are tax-free for qualified educational expenses like tuition, fees, and supplies required for enrollment. These are sponsored by states and managed by major brokerage firms. Some states also offer tax deductions or credits at the state level based on your contributions. And contribution limits are typically hundreds of thousands of dollars. Your investment options typically include mutual funds and TDFs.
Coverdell Education Savings Accounts
The Coverdell Education Savings accounts work similarly to 529 plans, but they have stricter contribution and income limits. The maximum contribution to your beneficiary is $2,000 per year.
And your modified adjusted gross income (MAGI) can't exceed $110,000 or $220,000 for married couples filing jointly for you to be able to open an account.
How to Open an Investing Account for a Minor
The process of opening an investing account for a minor, such as an UGMA, UTMA, or 529 plan, is fairly straightforward. It can be done online through a brokerage firm's website in minutes.
You generally need the following: Social Security number for you and the beneficiary; personal information like address; and checking account information to fund the account.
What to Watch Out For
Brokerage firms that offer these accounts vary in terms of quality. They offer different investing options, fees, services, and more. So it'll help to shop around for a firm and type of account that aligns with your overall investing goals.
The Bottom Line
Opening an investing account on behalf of your minor can be a great way to teach your kids about the value of money and money management. You can start as early as possible, as you would manage the assets. You have options such as UTMA accounts, UGMA accounts, 529 plans, and Coverdell Education Savings accounts. You can easily open one of these accounts online through a brokerage firm. But it would help to explore your options. Weigh points such as investment options, fees, and various services.
The Epoch Times copyright © 2025.
The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
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