Investment Accounts for Kids: Where to Start

Investment Accounts for Kids: Where to Start

Parents starting out with investment accounts for kids aren’t always clear on their options. When saving for their child’s future, parents want to find safe ways to help their money grow over time.  Investing can feel daunting, and parents worry about risking money they’ve worked so hard to save. There are plenty of low-risk accounts parents can use to start investing with little money. Consider the best account for your needs and risk level.

Investment accounts for kids education

Parents can get a great start investing in a college savings plan to help pay for their child’s degree someday. Investment accounts for kids education are safe tools that can put large and small amounts of money to work. Many accounts earn money kids can use for college, tax-free. Research popular options like: 

  • 529 Education Savings Plan
  • Coverdell Education Savings Account
  • Prepaid tuition plans
  • Other college savings accounts

Long-term savings and retirement accounts

You might be more comfortable with long-term investing and want to help your child build wealth from an early age. A retirement account or trust can put your money to work earning compound interest. Long-term investing makes the most of smaller deposits over time.

 

Retirement investing is an easy and safe way to start building wealth for your kids. Money you put in now has many years to grow and recover from any dips in the stock market. More time means much less risk. The best investment account for kids will depend on your family’s money situation.

Custodial Roth IRA

A Roth IRA could be a great option if your child earns their own money. Parents manage a custodial account until their child comes of age, and contributions to the account grow tax-free. Roth IRAs can also help your child before retirement with major purchases like a down payment on a house.

UGMA/UTMA Trusts

A parent or relative can open a trust for a child and act as account custodian until the child comes of age. You can add money to a trust and invest in assets like stocks, bonds, and mutual funds. Other family members can also add money to the trust. These investment accounts for kids have more flexibility, but fewer tax advantages.

Start with a financial literacy course 

Investment accounts for kids can be challenging to navigate. Before committing to any investment, make sure you understand how it will impact your money. Consider taking a financial literacy course to help you learn the basics. Get familiar with money terms you can teach your kids. A financial literacy course can help you feel more confident in your investing plan and prepared to grow your money over time. 

 


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Written by Kristin Yarbrough Published Aug 1, 2022 ● 2 min. read