Best Investment Accounts for Kids in 2025: A Parent’s Guide

How do I help my kid invest? This is a question many parents have concerning their children’s financial future. Investing is one way of creating wealth, requiring the investor to identify a suitable project that will ensure steady income and profits.

As a parent who wants to help their kids invest, you can consider introducing them to investment accounts. An investment account is an account that you sign up for to hold assets like cash, stocks, bonds, and other securities.  You earn in terms of exchange profits, dividends, and interest on the held assets.

Let us look at the best investment accounts for kids that you can sign them up for.

1. 529 College Savings Plan

Tertiary education is pretty pricey and many parents have to break bank to see their kids through college. You can save yourself and your kid from tuition hassles by signing up for a 529 college savings plan. 

The 529 plan is a tax-advantaged investing front designed for educational expenses. The invested portfolio grows tax-free, the same as other transactions like withdrawals. 

The two types of 529 college savings plans are prepaid tuition plans and education or college savings plans. The former plan is provided by a few states and select higher learning institutions, and involves you locking college credit for the future at current rates. They are not available for K-12 education.

Many people prefer the latter option, where they invest their funds in preset investment options selections. 

2. Custodial Roth IRA

The custodial Roth IRA account is ideal for kids earning some income from their side jobs. As a parent, you open this account for your child to set some funds away for their future.

The custodial Roth IRA works like the standard Roth IRA account, where it sets money aside for retirement, but in this case, it is for minors under the custody of their parents. Once the minors come of age, 18 or 21, depending on the state, they assume the accounts ownership. 

The investment growth and withdrawals are tax-free. Your kid can also withdraw the contributions any time, but not the earnings. 

3. The Coverdell Education Savings Account (ESA)

You can encourage your child to invest in the Coverdell Education Savings Account (ESA) to secure their educational future. This scheme is a government-created trust account that supports educational financing for beneficiaries under the age of 18. There may be age-restriction waivers in special circumstances.

The Coverdell ESA is more flexible than the 529 plan, where it caters to various schooling expenses for those in eligible institutions. Contributions from this plan are tax-free, provided they fall below the account holder’s adjusted educational costs. 

Furthermore, the ESA funds can be used for K-12 education, supporting primary, secondary, and tertiary school education. Please note that your young one should use the funds set aside in this plan by the time they are 30 years old. 

4. The Uniform Gifts to Minors Act (UGMA) Account

Another account that you can opt for your kids’ investments is the Uniform Gifts to Minors Act (UGMA) account. It is a custodial account that allows for the transfer of assets to under-age donors. 

It is an excellent way of giving your valuables to your young one without going through the hectic process of setting up a trust fund. The transferred properties legally become the minor’s but will be under the care of the guardian until the child becomes an adult and assumes account ownership. 

Contributions to the account are made with after-tax funds, meaning the beneficiaries won’t incur an income tax deduction. However, the tax shelter doesn’t extend to account-generated earnings, though the tax rate is at a kid’s rate, up to a certain amount.

UGMA accounts can hold cash, bonds, stocks, mutual funds, and other securities. 

5. A Uniform Transfers to Minors Act (UTMA) Account

The Uniform Transfers to Minors Act (UTMA) account is a custodial account, similar to the UGMA, but with more flexibility. It is another excellent investment front for your children, where you or other adults transfer and manage funds as custodians. 

As mentioned, it shares similarities with the UGMA account, the primary difference being what it can hold, where its versatility comes into play. Besides cash, bonds, stock and other securities, the UTMA account can also hold real estate, vehicles, patents, royalties and other valuables.

6. A Trading Account

You can encourage your young one to sign up for a trading account, especially if they are conversant with the stock market. You rely on credible stock brokerage platforms, where you stake money for a desired price movement.

It is a risky venture, but with the risks come great rewards and a learning opportunity. 

Get the Best Investment Account Depending on Your Needs

An investment account for your kid is one way of securing their financial future. They have funds to lean on when they come of age and have to sort bills like tuition. 

You should consult more about available investment accounts to get the best fit depending on your needs.