Open an Investment Account

Opening an investment account is how you move from saving money to growing it. Since you are under 18, you cannot legally enter into a binding contract on your own, which is why a parent or guardian must help you set up the account.

1. Why You Need a "Partner"

In the U.S., you must be 18 to open a standard brokerage account. To get around this, you use a Custodial Account. An adult (the Custodian) opens and manages the account for you (the Minor). You are the legal owner of everything inside, but the adult handles the technical side until you reach adulthood.

2. Choosing the Right Account Type

There are three main paths to take. Talk to your parent about which one fits your vision:

  • UGMA (Uniform Gifts to Minors Act): This is the most common. It is used for financial assets like cash, stocks, and bonds.

  • UTMA (Uniform Transfers to Minors Act): This allows for everything a UGMA does, plus physical assets like real estate or art (availability depends on your state).

  • Youth Investing Apps: Many modern companies offer specialized "Teen Accounts." These often allow you to log in to your own version of the app to research and trade, while your parent approves the activity from their phone.

  • Specialized Accounts (529 & Roth): There are also accounts specifically for college or long-term retirement.

Not sure which one to pick? More information on each at the bottom of the page. Scroll down to see the deep-dive for each goal.

3. Important Legal and Tax Facts

Before you deposit money, you should be aware of these three rules:

  • Irrevocable Gifts: Once money is put into a custodial account, it belongs to you. The adult cannot "take it back" for their own use.

  • The "Kiddie Tax": If your investments make a lot of money, a portion of those earnings might be taxed at your parent's tax rate.

  • College Financial Aid: Because the money is legally yours, it can sometimes be counted as an asset when you apply for college financial aid later.

Click HERE to learn more.

4. Your "Identity Kit" Checklist

To keep your money safe, the brokerage needs to verify exactly who you and your parents are. Gather these before you start the application:

  • Your Info: Full legal name, date of birth, and Social Security Number (SSN).

  • Parent Info: Their SSN, a government-issued photo ID (like a driver’s license), and proof of address.

  • Bank Info: You will need the routing and account number from your bank account to move money into your investments.

5. The 6-Step Setup Process

  1. Compare Brokerages: Look for one with $0 trading commissions and "Fractional Shares" (which let you buy a piece of a stock for as little as $1).

  2. Submit the Application: This is almost always done online or through a mobile app.

  3. Assign Roles: Your parent will be listed as the "Custodian," and you will be the "Minor/Owner."

  4. Link Your Bank Account: Connect your bank account to the brokerage account to fund your first investment.

  5. Make the First Deposit: You do not need to be wealthy to start. Many people start with just $10 or $20.

  6. Set Your Strategy: Decide together what to buy. Most beginners start with Index Funds or ETFs to keep things simple and diversified.

6. When You Turn 18 (or 21)

When you reach the "age of majority" in your state, the account is no longer custodial. The brokerage will help you transfer the assets into a standard account that is in your name only. You then gain full control over every decision.

Vanguard

  • Excellent for long-term passive investing, especially via low-cost index funds and ETFs.

  • No fees or minimums for a standard custodial brokerage account.

  • Does not provide fractional share trading (a limitation if you want to buy partial shares of expensive stocks).

Charles Schwab

  • Their “Schwab One Custodial Account” has no setup or maintenance fees and no minimum.

  • Commission-free trades for stocks and ETFs.

  • Offers robo-advisor (Schwab Intelligent Portfolios) as an option.

Fidelity

  • No minimum deposit, no account fees for custodial accounts.

  • Offers many investment choices (stocks, ETFs, mutual funds, options, fractional shares) under the custodial account.

  • Good educational tools and support to help teach investing.

E*TRADE

  • Provides custodial accounts (UGMA/UTMA) with features comparable to regular brokerage accounts.

  • No minimum to open, and commission-free trades for stocks and ETFs.

  • Good selection of no-load, no-transaction-fee mutual funds.

Now that you know how the process works, it’s time to choose your "Growth Engine." Every person has a different goal: some want to save for a car, some for college, and others want to be a millionaire by the time they retire.

Take a look at the three main paths below and click on the one that fits your vision best:

UTMA/UGMA Account

Choose this if you want the most freedom and no restrictions on how you spend the money later.

Learn more

Custodial Roth IRA

Choose this if you are definitely planning on more school and want the best tax savings for it

Learn more

529 Plan

Choose this if you have a job and want to build massive, tax-free wealth for the long-term.

Learn more

FAQs

  • No. Minors cannot legally sign binding financial contracts, so an adult must open and manage the account for them. The account is opened in the child’s name but controlled by the adult (called the custodian) until the child becomes an adult.

  • A custodial account is an investment account set up by an adult for a minor under laws like the UGMA or UTMA. The adult manages the money and investments, but everything legally belongs to the child. When the child reaches the age of majority (18 or 21, depending on the state), they take full control of the account.

    • UGMA (Uniform Gifts to Minors Act) accounts can hold only financial assets such as stocks, ETFs, mutual funds, and cash.

    • UTMA (Uniform Transfers to Minors Act) accounts can hold all of the above plus other assets like real estate or property, depending on the state.
      UTMA is available in most states and is slightly more flexible.

  • You’ll need personal information for both the adult and the child, including names, Social Security numbers, and birthdates. The custodian also needs to provide a valid ID. Most brokerages let you open the account online in just a few minutes.

  • The child is the account owner, so they are technically responsible for taxes on earnings. However, the IRS applies special “kiddie tax” rules: small amounts are taxed at the child’s rate, but beyond a certain threshold, extra income is taxed at the parent’s rate.

  • There are no contribution limits like with retirement accounts, but large gifts may trigger gift-tax reporting. In 2025, you can give up to $18,000 per year per child without needing to file a gift-tax return.

  • Yes, but any withdrawals must be for the child’s direct benefit — for example, education, extracurricular activities, or other legitimate expenses that help the child.

  • When the child reaches the legal age of majority in your state, the account automatically transfers to them. They gain full control over the assets and can decide what to do with the money.

  • Yes, it can. Because the account belongs to the child, it’s considered the child’s asset on the FAFSA form. That means it can slightly reduce eligibility for need-based financial aid compared to assets owned by the parent.

  • A 529 plan is designed specifically for education and offers tax-free growth for qualified school expenses. A custodial account is more flexible — you can invest for any purpose — but it doesn’t have the same tax benefits for education.

  • Yes, you can open more than one account (for example, one at Fidelity and another at Vanguard), but it’s often easier to manage everything in one place to simplify taxes and record-keeping.