How to Get Your Kid Started With Investing
Empower your child with investing basics: open accounts, choose smart investments, and teach lifelong financial habits for future wealth.
Your child has been earning a decent allowance from chores, receives birthday cash, and spends sparingly. Why not channel that into an investment account? Even small amounts invested early can harness the power of compounding, setting them up for lifelong financial success. While rules differ for minors, it’s straightforward to get started with you as custodian under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA).
Determine What Kind of Account to Set Up
The foundation is choosing the right account type. Minors can’t open standard brokerage accounts alone; an adult custodian manages it until the child reaches 18 or 21, depending on state laws. UTMA/UGMA custodial accounts allow transfers of cash, stocks, or bonds, offering flexibility for general investing.
For college-focused savings, consider a UTMA 529 plan. These offer tax-free growth for qualified education expenses like tuition, but funds are restricted to education—non-qualified withdrawals incur taxes and penalties.
Micro-investing suits small starters. Platforms like Stash or Stockpile offer custodial accounts with fractional shares. Stockpile integrates with BusyKid for tracking chores and allowances digitally, making it kid-friendly.
You might also need a linked UTMA checking or money market account to fund the brokerage and collect dividends. Note: Kids without earned income can’t open IRAs; they need a job for Roth or traditional versions.
Figure Out What Investment Vehicles to Use
Once the account is live, kids access adult-like options: mutual funds, stocks, ETFs. Choices depend on interests, starting capital, and involvement level.
- Individual Stocks: Ideal for kids tracking news or favorites like Disney or snack brands. Pick brokers with no/low minimums and fees. Exciting but risky—experts favor funds long-term.
- Mutual Funds: S&P 500 index funds track the market broadly with low costs. Great for passive investing, though minimums apply.
- Exchange-Traded Funds (ETFs): Similar to mutual funds but trade like stocks, often with lower minimums.
- Micro-Investing Apps: Buy fractions of shares/ETFs categorized simply (e.g., tech). Fees like Stash’s $1/month apply.
Engage kids by letting them pick companies they know, like their streaming service or gadget maker, then track performance together.
What About Taxes?
Tax implications matter. In UTMA/UGMA, earnings are the child’s, but the ‘kiddie tax’ applies: first $1,300 (2024) untaxed, next $1,300 at child’s rate, excess at parents’. Report on child’s return if over $1,300.
529s shine tax-wise: contributions grow tax-free for education. No federal deduction, but some states offer them. Watch financial aid—child-held assets reduce aid more than parental ones.
Will They Actually Use It?
Set short-term goals to motivate: Lego sets, camp, first car. Avoid long horizons if aid is possible, as child assets impact eligibility more. Tie to chores/allowance for real stakes—match savings to boost deposits.
Eight Engaging Ways to Teach Investing
Beyond setup, spark interest with hands-on lessons. Adapt by age for lasting habits.
- Budgeting 101: Use envelopes/piggy banks for saving, sharing, spending. Builds allocation basics.
- Talk About Money: Demystify family finances—why invest, diversify, give. Clears misconceptions.
- Connect to Goals: Link investing to dreams like bikes via deferred gratification. Chores fund shortfalls.
- Savings Incentive: Match contributions like 401(k)s to encourage deposits.
- Fun Side of Investing: Play Stock Market Game or track familiar stocks’ ups/downs.
- Open Account with Older Kids: Buy shares, analyze portfolios together.
- Meet Financial Advisor: Include teens in meetings; many offer youth literacy classes.
- Family Charitable Trust: Involve in philanthropy decisions—links money to impact, teaches stewardship.
Power of Starting Early: Compound Interest
Early investing leverages compounding. $1,000 at age 10 growing 7% annually hits ~$15,000 by 50, ~$76,000 by 70. Discuss this magic—time trumps amount.
For non-workers, custodial index funds grow steadily. Even lazy kids benefit from parent-funded accounts.
Practical Steps Table
| Age Group | Best Start | Activities | Accounts |
|---|---|---|---|
| Under 10 | Budgeting, goals | Chores, games | UTMA savings |
| 10-15 | Stock tracking | Apps, matching | Custodial brokerage |
| 16+ | Portfolio mgmt | Advisor meets, trusts | Full UTMA/529 |
Frequently Asked Questions (FAQs)
Q: What’s the minimum age for a kid’s investment account?
A: No minimum—start anytime with a custodian under UTMA/UGMA.
Q: Can kids invest without a job?
A: Yes, via custodial accounts; no earned income needed unlike IRAs.
Q: Are micro-investing apps safe for kids?
A: Custodial ones like Stockpile/Stash are, with parental oversight.
Q: How does investing affect college aid?
A: Child assets reduce aid more; use parental 529s if aid likely.
Q: Best first investment for beginners?
A: Low-cost S&P 500 index fund or ETF for broad, passive growth.
Overcoming Challenges
High-income parents may spoil kids—resist by enforcing chores and shortfalls. Games like Pay Day teach cycles. For all, financial literacy prevents inheritance squander.
Involve kids in decisions—talk compounding, goals. This builds savvy adults.
References
- How to Get Your Kids Interested in Investing at Any Age — City National Bank. 2023. https://www.cnb.com/personal-banking/insights/teach-children-investing.html
- How to Get Your Kid Started With Investing — Wise Bread. Accessed 2026. https://www.wisebread.com/how-to-get-your-kid-started-with-investing
- How to Start Investing Money Early for Your Children — YouTube (video transcript). Accessed 2026. https://www.youtube.com/watch?v=Oe31Mzd4Dow
- Family Game Night Can Be a Fun Way to Teach Kids About Money — Citizens National Bank Ohio. 2022-07-25. https://www.cnbohio.com/family-game-night-can-be-a-fun-way-to-teach-kids-about-money/
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