Yes, you can open a brokerage account for your child, but the account structure depends on their age and what you want to teach them

You can open an investment account in your child's name at most brokerages, but you will be the account owner and decision-maker until they reach the age of majority (18 or 21, depending on your state). The two main structures are a custodial account under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA), or a 529 college savings plan if education funding is your goal. A custodial account lets your child own the money and investments directly; a 529 is a tax-advantaged education-only account. Both put assets in your child's name, which has tax consequences you should understand before you start.

The key difference from a regular account in your name is that custodial accounts belong to your child legally, even though you control them now. That means the money and any growth count as their income for tax purposes, and when they turn 18 or 21 (depending on your state), the account transfers to them completely—you lose control. If you want to keep control of the money indefinitely, you would instead open an account in your own name and straightforward invest for their benefit, but that account would be yours, not theirs.

Key Takeaways

  • A custodial account (UTMA or UGMA) puts investments in your child's name and transfers to them at age 18 or 21, depending on your state.
  • You control the account now, but your child owns the assets, so investment gains count as their income for tax purposes.
  • A 529 plan is tax-advantaged for education expenses only and does not transfer to your child at age 18—you keep control indefinitely.
  • Most major brokerages (Fidelity, Schwab, Vanguard, E*TRADE) offer custodial accounts with no minimum balance or age restrictions on the child.
  • Custodial accounts can affect your child's financial aid may be able to access for college because the assets are counted as theirs, not yours.

How custodial accounts work and who can open one

A custodial account is a real brokerage account held in your child's name, with you as the custodian. You choose the investments, make the trades, and manage the account day-to-day. Your child does not need to do anything or even know the account exists until you decide to tell them. You can open one for a child of any age—newborns, toddlers, teenagers—and there is no minimum deposit at most brokerages.

The account is registered under your child's Social Security number, not yours. When you open it, you will provide your child's name, date of birth, and SSN, plus your own information as the custodian. The brokerage will ask which state's law governs the account (UTMA or UGMA); most states use UTMA, which is slightly broader and allows more types of assets. Once the account is open, you can deposit money, buy stocks, mutual funds, ETFs, or bonds—whatever the brokerage offers.

The critical date is when your child reaches the age of majority in your state. In most states that is 18; in a few it is 21. On that date, the account legally becomes theirs, and you have no further control. If you named yourself as custodian, you cannot prevent the transfer or keep managing it. Some custodians allow you to name a successor custodian (usually a spouse or another adult), but that person still cannot prevent the transfer—they can only delay it slightly.

Tax consequences of custodial accounts

Money in a custodial account is taxed as your child's income, not yours, which can be an advantage or a disadvantage depending on how much is in the account. For 2024, the first roughly $1,450 of investment income (dividends and capital gains) is tax-free for a dependent child. The next $1,450 is taxed at your child's rate, which is usually lower than yours. Anything above that is taxed at your rate—the "kiddie tax" rule—until your child turns 24.

This means a small custodial account can grow tax-free or at low rates. A large one ($50,000 or more) may trigger higher taxes than if you had kept the money in your own account. You should talk to a tax professional before opening a custodial account with a substantial amount, because the tax bill could be larger than you expect.

Custodial accounts also affect financial aid calculations. When your child applies for college, the Free process for Federal Student Aid (FAFSA) counts custodial assets as your child's resources, not yours. This reduces their aid may be able to access more sharply than if the same money were in your name. A 529 plan has a gentler treatment on the FAFSA, so if college funding is your main goal, a 529 may be better.

529 plans as an alternative for education savings

A 529 plan is a tax-advantaged savings account specifically for education expenses. You open it in your child's name, but you keep control of the account indefinitely—it does not transfer to your child at 18 or 21. You can invest the money, and all growth is tax-free as long as you use it for may have access to education expenses: tuition, fees, room and board, books, computers, and student loan repayment.

The main advantage is tax treatment. Growth in a 529 is never taxed at the federal level if used for education. A custodial account with the same investments would owe taxes on dividends and gains every year. The main disadvantage is flexibility: if your child does not go to college or does not use all the money, you can transfer the account to another family member (a sibling, cousin, or even yourself), but you cannot straightforward withdraw the money for non-education purposes without paying taxes and a 10% penalty on the growth.

Each state runs its own 529 plan, and you can open one in any state regardless of where you live. Some state plans offer tax deductions if you contribute to your own state's plan, so check whether your state offers that benefit. The investment options vary by plan—some offer age-based portfolios that automatically shift from stocks to bonds as your child gets older, and others let you pick individual funds.

Where to open a custodial account and what to expect

Most major brokerages offer custodial accounts: Fidelity, Charles Schwab, Vanguard, E*TRADE, TD Ameritrade, and Webull all have them. The process is straightforward. You go to the brokerage website, select "open an account," choose "custodial account," and fill in your child's information and yours. You will need your child's Social Security number and date of birth. Most brokerages do not charge a fee to open or maintain a custodial account.

After you open the account, you can fund it by bank transfer, check, or wire. Some brokerages allow you to set up automatic monthly deposits. Once the money is in the account, you can invest it however you want—buy individual stocks, index funds, ETFs, or hold it in cash. You manage the account through the brokerage's website or app, just like you would manage your own account.

The account statements will show your child's name and SSN, and the brokerage will send tax documents (1099 forms) in your child's name at the end of the year. You will report the income on your tax return if your child is a dependent, or your child will report it on their own return if they file one. Keep the statements and tax documents for your records.

What happens when your child turns 18 or 21

The account transfers to your child on the date they reach the age of majority in your state. You will no longer have legal authority to manage it or make trades. Your child can then do whatever they want with the money—spend it, invest it differently, or leave it alone. You cannot prevent this transfer or condition it on their behavior or choices.

Some parents use this as a teaching moment: they open a custodial account, involve their child in investment decisions as they get older, and use the transfer date as a natural point to discuss financial responsibility. Others open the account without telling their child, and the transfer comes as a surprise. Either approach is legally valid, but the first tends to work better if your goal is to teach your child about investing.

If you are concerned about your child's financial maturity, a 529 plan avoids this problem because you keep control. You can also consider a trust, which is more complex and expensive to set up but gives you more control over when and how your child receives the money. A lawyer can advise you on whether a trust makes sense for your situation.

Custodial accounts versus accounts in your own name

You have a third option: open an investment account in your own name and straightforward invest for your child's benefit. You keep full control indefinitely, and the tax treatment is simpler—all income and gains are yours. The downside is that the money is legally yours, not your child's. If you die, the account goes through your estate. If you face creditors or a lawsuit, the account could be at risk. And your child learns nothing about owning investments.

A custodial account teaches your child that the money is theirs and gives them real ownership, even though you control it now. It also protects the money from your creditors in most states, because it is not your property. The tradeoff is the tax complexity and the loss of control at age 18 or 21.

The right choice depends on your goals. If you want to teach your child about investing and give them real ownership, a custodial account works. If you want to save for their education with tax advantages, a 529 is better. If you want to keep full control and simplicity, an account in your own name is fine—just understand that your child will not own the assets.

Frequently Asked Questions

Can I take money out of my child's custodial account if I need it?

Legally, no. The money belongs to your child, not you. If you withdraw it for your own use, you are misusing the account and could face legal consequences. You can use the money for your child's benefit—education, medical care, living expenses—but not for yourself. Some states have rules about what counts as "benefit," so check your state's law if you are unsure.

What happens to the custodial account if I die?

The account belongs to your child, so it does not go through your estate. Your child keeps it and can access it when they reach the age of majority. If your child is still a minor, the court may appoint a guardian to manage the account, or you can name a successor custodian in your will to take over until your child is old enough.

Can my child have a custodial account and a regular account at the same time?

Yes. Your child can have a custodial account (which you control) and also open their own account once they are old enough (usually 13 or older with parental consent, or 18 without). The accounts are separate, and the rules for each explore independently. A custodial account is a good way to start; a regular account lets your child practice managing their own money.

Does a custodial account affect my child's college financial aid?

Yes, negatively. The FAFSA counts custodial assets as your child's resources, which reduces their aid may be able to access more sharply than if the same money were in your name. A 529 plan has a gentler treatment. If you are planning to pay for college with savings, a 529 is usually better than a custodial account from a financial aid perspective.

Can I change my mind and move the money to a 529 plan?

Not directly. A custodial account and a 529 are separate accounts with different rules. You would have to withdraw the money from the custodial account (triggering taxes on any gains), then deposit it into a 529. This is usually not worth it because of the tax bill. If you are starting fresh, choose the account type that fits your goal before you open it.