No Result
View All Result
SUBMIT YOUR ARTICLES
  • Login
Thursday, October 2, 2025
TheAdviserMagazine.com
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
No Result
View All Result
TheAdviserMagazine.com
No Result
View All Result
Home Market Research Stock Market

How to Invest for a Child

by TheAdviserMagazine
3 weeks ago
in Stock Market
Reading Time: 9 mins read
A A
How to Invest for a Child
Share on FacebookShare on TwitterShare on LInkedIn


When it comes to securing your child’s financial future, choosing the best UGMA/UTMA accounts is crucial. In this article, we’ll review and compare the top custodial accounts to help you decide which one best meets your needs, considering factors like fees, investment options, and unique features.

Understanding UGMA and UTMA Accounts

UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) accounts are two types of custodial accounts designed to hold and manage money or other assets for a minor until they reach the age of majority. These custodial accounts fall under the umbrella of investment accounts but differ from tax-advantaged college savings plans like 529s. UGMA/UTMA accounts allow family members, including an adult custodian, to gift stock, mutual funds, index funds, or even cash to a child without needing to establish a trust.

The custodian—often a parent or close relative—manages the investments in the account until the child reaches the designated age, usually 18 or 21 depending on the state. At that point, the child gains full control of the custodial account and can use the funds for any purpose, such as college, starting a small business, or buying their first car. These accounts are often used as a way to teach children about saving and investing while preparing them for long-term financial independence.

UGMA/UTMA accounts are considered custodial investment accounts and are commonly used by parents who want to invest money in their child’s future. They are particularly effective for young investors because the funds grow with the market over time. Unlike college savings plans, the assets in these accounts are not limited to educational use.

Key Benefits and Considerations

One of the most appealing benefits of UGMA and UTMA accounts is their flexibility. They accept contributions from anyone and can hold a wide range of investment options, including individual stocks, mutual funds, exchange traded funds (ETFs), and other investments. Contributions are irrevocable gifts and may incur federal gift tax if they exceed the annual exclusion amount.

Important considerations include:

Assets in the account are considered the child’s and can affect financial aid.

Unearned income may be taxed at the parent’s tax rate due to kiddie tax rules.

You cannot withdraw money without using it for the benefit of the child.

Because of their flexibility and low fees, UGMA and UTMA accounts remain among the best custodial accounts for long-term wealth transfer.

Get a $25 BONUS when you sign up for Wealthsimple and deposit $1 within 30 days!

Top UGMA/UTMA Account Providers

Charles Schwab Custodial Account

Charles Schwab offers one of the best custodial brokerage account options on the market. With no account minimums, no maintenance fees, and access to fractional shares, it’s ideal for families looking for affordable, easy-to-manage accounts. Schwab offers account registration online and provides access to a wide array of stocks, bonds, mutual funds, and ETFs.

Features:

No monthly fees

No account minimums

Commission-free ETF trades and stock trades

Access to Vanguard funds

Strong educational resources and physical locations for in-person support

Greenlight App Custodial Investing

Greenlight is designed to help families manage money and introduce kids to saving and investing. It allows for real-time monitoring and helps children make informed investment decisions. It’s perfect for young investors who are just getting started.

Features:

Parental controls and insights

Custom savings goals and allowance tools

Invest money in ETFs and stocks

Educational games and lessons

Acorns Early

Acorns Early simplifies custodial investing with automatic round-ups and professionally managed portfolios. It’s one of the few services where even small transactions help start saving and investing.

Features:

Start with as little as $5

Diversified portfolios using ETFs and mutual funds

Round-Ups® to grow investment assets from spare change

Smart tax strategies and long-term savings tools

Wealthsimple

Wealthsimple stats

For Canadian users, Wealthsimple offers a sleek, low-fee platform that combines checking, saving, and investing. Its custodial investment accounts are easy to manage and come with advisor support.

Features:

Cash-back spending

Up to 2.75% interest

No monthly fees

Personalized investment management

Wealthsimple RESP

Get a 1% match when you transfer an eligible account to Wealthsimple!

Tax Benefits and Implications

UGMA and UTMA accounts provide important tax benefits, especially when compared to a retirement account or Roth IRA, which have contribution limits. While contributions are not tax deductible, they can lower a family’s taxable estate. Here’s what you need to know:

Contributions over $19,000 per child ($38,000 for a married couple filing jointly) may incur federal gift tax.

Investment income is subject to the kiddie tax.

The child’s benefit is taxed progressively: the first $1,250 is tax-free, the next $1,250 is taxed at the child’s rate, and amounts beyond that are taxed at the parent’s tax rate.

Gains from selling stocks or other assets are taxed as capital gains.

If you’re unsure how to navigate these rules, a financial advisor or certified financial planner can help minimize tax liability and clarify the benefits of custodial accounts.

How to Open a UGMA or UTMA Account

Opening a custodial brokerage account is a straightforward process. Most major brokerages and fintech platforms offer online applications that require:

The child’s Social Security number

A valid ID from the custodian

Basic personal information

Once the account is set up, the custodian can start adding money through bank account transfers or rolling over funds from other accounts. There are no account minimums for many providers, though specific investment products may have their own minimum balance requirements.

Investors can choose between self-directed brokerage account platforms or managed portfolios. If you’re new to investing, you may prefer a provider that offers automated investment management or guidance from a financial advisor.

Tips for Managing a Custodial Account

UGMA UTMA parent child

Managing a UGMA or UTMA account takes more than just buying a few stocks. Here are some tips to ensure smart, long-term growth:

1. Diversify Your Investment OptionsDon’t rely solely on individual stocks. Consider mutual funds, index funds, and ETFs for broader exposure.

2. Monitor FeesLook for accounts with low fees and no account maintenance charges. High fees can erode returns over time.

3. Plan for the Age of MajorityOnce the child reaches the age of majority, they gain full control of the custodial account. Be sure to discuss financial responsibility ahead of time.

4. Stay Informed on Tax RulesCapital gains and other investment income must be reported. Consider speaking with a certified financial planner for personalized guidance.

5. Use it as a Teaching ToolCustodial accounts are great for introducing personal finance topics to your child. Include them in discussions about the stock market, saving, and making investment decisions.

Get a $25 BONUS when you sign up for Wealthsimple and deposit $1 within 30 days!

Final Thoughts on UGMA/UTMA Accounts

UGMA and UTMA accounts are versatile, cost-effective tools to transfer wealth, reduce taxable estates, and support a child’s future financial growth. Whether your goal is paying taxes efficiently, teaching kids to manage money, or avoiding federal gift tax, the right custodial investment account can make a difference.

With platforms like Charles Schwab, Acorns Early, and Greenlight, families can access low-cost, feature-rich options for investing in their child’s future. Make sure to evaluate account fees, investment decisions, and long-term goals when selecting your custodial account.

FAQs

What is the difference between UGMA and UTMA accounts?

UGMA accounts can hold financial assets like stocks, bonds, and mutual funds. UTMA accounts expand on this by allowing additional property types, such as real estate and art. Both are custodial accounts managed by an adult on behalf of a minor until the child reaches the age of majority.

Are there contribution limits for UGMA and UTMA accounts?

There are no legal contribution limits, but contributions above $19,000 (or $38,000 for a married couple filing jointly) per year may be subject to the federal gift tax.

Do UGMA/UTMA accounts offer tax benefits?

Yes. A portion of the account’s investment income may be taxed at the child’s tax rate, which is often lower than the parent’s. However, income above certain thresholds may be subject to the “kiddie tax” at the parent’s rate.

Can anyone contribute to a custodial account?

Yes. Anyone—including grandparents, godparents, or family friends—can add money to a UGMA or UTMA account. All contributions are irrevocable gifts to the child.

Is it better to use a custodial account or a 529 college savings plan?

It depends on your goals. A 529 plan offers tax-free growth for education expenses, while UGMA/UTMA accounts are more flexible in how the funds can be used but come with different tax rules and financial aid impacts.

The Best Canadian Brokerages as of June 30, 2025

Ranking of Top Canadian Stock Brokerages Based on Fees, Features, and Sign-Up Bonuses

We are experienced users of dozens of Canadian stock trading platforms. We stay up to date on these platforms’ service offerings, subscription fees, trade commissions, and welcome bonuses. The brokerages listed below are for Canada-based investors, and are ranked in order of overall value received after taking advantage of their sign-up and/or referral offers.

QuestTrade

Fees:

$0 commission on equities; $9.95 for mutual funds.Full Review

Features:

✅ Commission-free stock and ETF purchases✅ Dual-currency accounts without conversion fees✅ Advanced trading with multi-leg options support

Sign-up Bonus:

$50 Refer a Friend Bonus

Learn more

Interactive Brokers

Fees:

$0.01/share for CAD stocks; $0.005/share for US stocks.Full Review

Features:

✅ Access to 150+ global markets from a Canadian account✅ Tiered interest on idle cash balances over $10,000 CAD✅ Supports portfolio margin and direct market routing

Sign-up Bonus:

Refer a Friend, Get $200

Learn more

moomoo

Fees:


$0.99/trade for US equities & ETFs; $0.65/contract for US options.Full Review

Features:

✅ Access to U.S. Markets✅ Access to Canadian Markets✅ RRSP and TFSA Accounts

Sign-up Bonus:

Deposit $100, get $20 in NVDA stock; Deposit $2,000, get $50 in NVDA stock; Deposit $10,000, get $300 in NVDA stock; Deposit $50,000, get $1,000 in NVDA stock

Learn more

QTrade

Fees:

$8.75 per trade for stocks, ETFs, and mutual funds.Full Review

Features:

✅ Auto-deposit investing in pre-built portfolios✅ In-kind transfers & dividend reinvestment plans for CA stocks✅ RESP and FHSA accounts with self-directed tools

Sign-up Bonus:

$1 off per trade for investors 18-30

Learn more

Wealthsimple

Features:

✅ Commission-free stock, ETF, and crypto trading in one app✅ 24/5 U.S. market access with fractional share support✅ No FX fees on U.S. trades if subscribed to USD feature

Sign-up Bonus:

$25 bonus after depositing $1 or more (first 30 days)

Learn more

Fees, features, sign-up bonuses, and referral bonuses are accurate as of June 30, 2025. All information listed above is subject to change.



Source link

Tags: ChildInvest
ShareTweetShare
Previous Post

What SQMS 2 is and why it matters

Next Post

September 2025 Estate Planning & Elder Law News

Related Posts

edit post
Investing Lessons From Video Game Economies: What Fortnite and Roblox Can Teach You About Money

Investing Lessons From Video Game Economies: What Fortnite and Roblox Can Teach You About Money

by TheAdviserMagazine
October 1, 2025
0

A sword in World of Warcraft once sold for over $16,000.A rare Fortnite skin can resell for hundreds of dollars.And...

edit post
How AI and Data Speed Up and Scale B2B Resale

How AI and Data Speed Up and Scale B2B Resale

by TheAdviserMagazine
October 1, 2025
0

The era of manual spreadsheets and phone calls to manage customer returns and excess inventory is rapidly fading. In its...

edit post
How Credit Card Balance Transfers Work: Save on Debt

How Credit Card Balance Transfers Work: Save on Debt

by TheAdviserMagazine
September 25, 2025
0

Americans are carrying over $1 trillion in credit card debt, according to the Federal Reserve. With average annual percentage rates...

edit post
Top Picks to Build Credit

Top Picks to Build Credit

by TheAdviserMagazine
September 25, 2025
0

For many college students, getting a first credit card is a major step toward financial independence. Used wisely, student credit...

edit post
The #1 Wealth Habit Young People Skip — and How to Fix It

The #1 Wealth Habit Young People Skip — and How to Fix It

by TheAdviserMagazine
September 23, 2025
0

If you ask most people what it takes to build wealth, you’ll probably hear some version of: “Get a good...

edit post
What TikTok Star Earnings Teach Us About Investing

What TikTok Star Earnings Teach Us About Investing

by TheAdviserMagazine
September 16, 2025
0

Charli D’Amelio posted her first TikTok at 15. Fast-forward a few years and she’s earning millions from brand deals, appearances,...

Next Post
edit post
September 2025 Estate Planning & Elder Law News

September 2025 Estate Planning & Elder Law News

edit post
Lennar’s (LEN) sales and profits anticipated to decline in Q3 2025

Lennar’s (LEN) sales and profits anticipated to decline in Q3 2025

  • Trending
  • Comments
  • Latest
edit post
What Happens If a Spouse Dies Without a Will in North Carolina?

What Happens If a Spouse Dies Without a Will in North Carolina?

September 14, 2025
edit post
California May Reimplement Mask Mandates

California May Reimplement Mask Mandates

September 5, 2025
edit post
Does a Will Need to Be Notarized in North Carolina?

Does a Will Need to Be Notarized in North Carolina?

September 8, 2025
edit post
Who Needs a Trust Instead of a Will in North Carolina?

Who Needs a Trust Instead of a Will in North Carolina?

September 1, 2025
edit post
DACA recipients no longer eligible for Marketplace health insurance and subsidies

DACA recipients no longer eligible for Marketplace health insurance and subsidies

September 11, 2025
edit post
‘Quiet luxury’ is coming for the housing market, The Corcoran Group CEO says. It’s not just the Hamptons, Aspen, and Miami anymore

‘Quiet luxury’ is coming for the housing market, The Corcoran Group CEO says. It’s not just the Hamptons, Aspen, and Miami anymore

September 9, 2025
edit post
6 Halloween Destinations to Treat Yourself

6 Halloween Destinations to Treat Yourself

0
edit post
Visa crackdowns are blocking students’ study-abroad dreams, so India’s Leverage Edu is rerouting them

Visa crackdowns are blocking students’ study-abroad dreams, so India’s Leverage Edu is rerouting them

0
edit post
Report: The Financial Landscape of Sub-Saharan Africa

Report: The Financial Landscape of Sub-Saharan Africa

0
edit post
PepsiCo’s new challenge: Making its chips and sodas colorful without artificial dyes

PepsiCo’s new challenge: Making its chips and sodas colorful without artificial dyes

0
edit post
Advisor guide: navigating the government shutdown

Advisor guide: navigating the government shutdown

0
edit post
What CEOs are saying about the government shutdown

What CEOs are saying about the government shutdown

0
edit post
PepsiCo’s new challenge: Making its chips and sodas colorful without artificial dyes

PepsiCo’s new challenge: Making its chips and sodas colorful without artificial dyes

October 2, 2025
edit post
What CEOs are saying about the government shutdown

What CEOs are saying about the government shutdown

October 2, 2025
edit post
Report: The Financial Landscape of Sub-Saharan Africa

Report: The Financial Landscape of Sub-Saharan Africa

October 2, 2025
edit post
Sign of the times as Swiss buy euros, not dollars

Sign of the times as Swiss buy euros, not dollars

October 2, 2025
edit post
XRP Price Prediction: CTO Exit and Investor Sell Calls Clash With Bullish .70 Target

XRP Price Prediction: CTO Exit and Investor Sell Calls Clash With Bullish $4.70 Target

October 2, 2025
edit post
Do you pay GST/HST when you build or renovate a house?

Do you pay GST/HST when you build or renovate a house?

October 2, 2025
The Adviser Magazine

The first and only national digital and print magazine that connects individuals, families, and businesses to Fee-Only financial advisers, accountants, attorneys and college guidance counselors.

CATEGORIES

  • 401k Plans
  • Business
  • College
  • Cryptocurrency
  • Economy
  • Estate Plans
  • Financial Planning
  • Investing
  • IRS & Taxes
  • Legal
  • Market Analysis
  • Markets
  • Medicare
  • Money
  • Personal Finance
  • Social Security
  • Startups
  • Stock Market
  • Trading

LATEST UPDATES

  • PepsiCo’s new challenge: Making its chips and sodas colorful without artificial dyes
  • What CEOs are saying about the government shutdown
  • Report: The Financial Landscape of Sub-Saharan Africa
  • Our Great Privacy Policy
  • Terms of Use, Legal Notices & Disclosures
  • Contact us
  • About Us

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.