Investing for Kids: A Guide to Building Financial Futures

One of the best ways to set children up for financial success is to introduce and teach important money lessons from an early age. This may mean helping them manage a bank account, explaining the wonders of compound interest, or teaching them about family budgeting.

But while the majority of parents do talk to their kids about money, a much smaller percentage introduce the idea of investing money in the stock market. When you consider how valuable the growth of an investment portfolio could be over a child’s lifetime, though, it’s easy to see why investing with your child might be a great decision.

Let’s talk about the different ways you can invest on a minor’s behalf, where to start, and exactly how to buy stock for a child when you’re ready.

In this article

• How to buy stock for a child: 5 options
• How to choose a stock for your child
• FAQs about buying stock for a child
• The bottom line

How to buy stock for a child: 5 options

There are a few options to choose from if you are looking to buy stock for a child, whether he or she is your own child or a grandchild, sibling, niece/nephew, etc. Here are five investment routes to consider.

1. Give the gift of stock

On the day of my 11th birthday, a single share of Amazon stock had a price tag of just over $4.

Though I do remember that birthday very well, I don’t remember what my parents or grandparents bought me that year; it probably amounted to somewhere in the $40 price range. Just imagine if, rather than buying me the latest trendy toy or a new pair of shoes, my grandma had opted to give me 10 shares of Amazon instead.

Today, that 11th birthday gift would be worth nearly $376,200.

Unfortunately, I don’t have a bunch of well-aged Amazon stocks lying around. It’s easy to see, though, how gifting the children in your life with a share of stock can be potentially lucrative. This gift can also garner their own interest in investing and help establish their investment portfolio for the future.

Companies like Stockpile allow you to give stock gift cards in any amount from $1 to $2,000. You can choose from a wide range of individual stock options — such as Apple, Disney, Facebook, and more — either by purchasing a physical gift card or by simply printing out a gift certificate from your home computer.

You (or another adult) can then set up a custodial account on Stockpile, at which time the recipient can redeem their Stockpile gift for full or fractional shares and begin trading. Minor children can track their stock’s progress over time and even make their own (approved) stock purchases for additional shares.

Once they come of age, the account ownership switches over to the now-adult child and hopefully they will have a nice investment portfolio upon which to build.

2. Open a custodial brokerage account

Whether you’re interested in purchasing specific company stocks or diversifying your child’s investments, opening a custodial brokerage account is an easy place to start.

Custodial accounts are also referred to as UTMA/UGMA accounts, which stands for Uniform Transfer to Minors Act and Uniform Gifts to Minors Act. These accounts act as an irrevocable trust for minors, allowing them to own assets (such as stocks or shares of a mutual fund or exchange-traded funds) that are managed by a parent or guardian until the child reaches a certain age.

Platforms like Stash and Acorns make it easy to establish and fund custodial brokerage accounts to begin investing for a child. With Stash,¹ for instance, you can purchase whole or fractional shares of stocks or opt for ETFs (exchange-traded funds),³ starting with as little as $1.⁴ You’ll need the Stash+ plan in order to manage custodial accounts, which runs $9 per month.²

Acorns Early allows you to open custodial accounts for kids in just minutes, which are invested in aggressive ETF-based portfolios. Acorns offers automatic recurring investments with the opportunity for bonus investments, and Acorns Family plans are only $5 per month.

Funds held in a custodial investment account can generally be utilized for the child’s own expenses without penalty. This may include educational costs as well as things like music lessons, sports training, or even clothes and school supplies.

*It’s important to note that custodial accounts are considered an asset belonging to the child. Depending on the value of the account, this could impact financial aid decisions for college down the line.