Under U.S. law, children under the age of 18 aren’t allowed to have sole ownership of bank accounts or investment accounts. The only significant exception to this rule concerns teenagers who’ve been granted legal emancipation from their parents — a status that applies to a tiny fraction of the under-18 populace.
The prohibition on sole account ownership for minors is certainly reassuring for parents concerned that their kids aren’t capable of making sound financial decisions on their own. At the same time, it complicates parents’ good-faith efforts to teach their kids about money and prepare them for a not-too-distant future in which they will have to manage their own money without parental guidance.
Custodial accounts — checking, savings, investing, even college savings plans and prepaid debit cards — offer a win-win workaround. They empower kids to take (limited) control of their own finances and internalize basic financial concepts by doing even as they allow parents veto power over questionable decisions.
Best Custodial Accounts for Kids
Clearly, custodial accounts have an important role to play in financial education. But they’re not nearly as common as noncustodial accounts.
Two federal laws, the Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA), make it easy for parents to set up and fund custodial bank and investment accounts for a minor child without establishing a trust (a time-consuming and somewhat costly process).
So how do you know you’re choosing the best custodial account for your child? Easy — just find it on this list.
The best custodial bank accounts and investment accounts are UTMA or UGMA accounts that have few or no account fees, no fees for everyday transactions (including stock trades where applicable), and built-in financial education tools that teach valuable and hopefully durable lessons about managing and growing money.
When the minor account holder (beneficiary) reaches the age of majority, many (but not all) of these accounts can be converted to noncustodial status, giving the beneficiary full control of the account.
Most of the custodial accounts on this list also pair with noncustodial accounts that adults can use like any other. That makes the financial education process worthwhile for the whole family.
Comprehensive Account Lineup With Custodial Investments and Financial Education Tools
Acorns is a comprehensive investing and banking platform for individuals and families.
With three reasonably priced plans and money management options for every stage of life, it’s easy to grow into as your family expands and your financial goals become more complex. Acorns Family, the most comprehensive plan, is a true one-stop banking and investing shop.
You’ll need to upgrade to Acorns Family — at $5 per month, that’s not much of an ask — to take advantage of Acorns Early, the platform’s custodial brokerage solution for minor children. Acorns Early can accommodate multiple children in multiple accounts at no additional cost per child.
As a UTMA/UGMA product, funds held in Acorns Early accounts can be used for any purpose that benefits the child. And Acorns has a host of kid-friendly merchant partners that offer bonus savings and investments on eligible purchases, including Disney+ and ABC Mouse.
- Plans and Pricing: For $5 per month, Acorns Family offers a custodial investment account (Acorns Early) plus a comprehensive lineup of accounts and capabilities for the entire family. For $3 per month and $1 per month, respectively, Acorns’ two lower-priced plans (Acorns Personal and Acorns Lite) have fewer account types and features.
- Account Types: Acorns Early (custodial investment accounts), Acorns Invest (a taxable investment account for adults), Acorns Later (a tax-advantaged retirement investing account), Acorns Spend (a free checking account for adults).
- Features and Benefits: Round up and invest the change on every eligible debit card transaction using Acorns’ Round-Ups feature. Earn bonus investments through purchases with more than 350 Found Money partners. Get up to 10% bonus investments on eligible purchases with your Acorns Spend account.
Purchase and Give Gift Cards Redeemable for Stocks and ETFs
Any of the more than 4,000 stocks and exchange-traded funds (ETFs) available on Stockpile are eligible for redemption in increments ranging from $1 to $100, including popular names like Disney, Netflix, and Apple.
Fractional share redemptions bring stocks and ETFs whose share prices exceed the maximum face value of a Stockpile gift card within reach for givers and recipients alike.
Not sure your recipient wants the stock you chose? Never fear: Stockpile has the brokerage equivalent of a digital gift receipt. Funds stored in Stockpile gift cards are as good as cash, meaning recipients can use them to purchase any stock or ETF available on Stockpile — even if the gift card bears the brand name of the stock you chose.
- Plans and Pricing: There’s no cost to open a custodial account with Stockpile.
- Account Types: Custodial investment accounts for minors under age 18 and taxable general investing accounts for adults over age 18.
- Features and Benefits: Purchase fractional shares of any stock or ETF available through Stockpile (more than 4,000 in all). Purchase and give gift cards redeemable for stock in denominations ranging from $1 to $100.
Powerful Research and Analysis Tools and No Commissions on Stock, ETFs, or Options Trades
A robust array of research and analysis tools complements value-added features not available at all brokerages, such as securities lending and extended-hours trading.
Seasoned investors eager to introduce their kids to the equities markets early can open a Firstrade custodial brokerage account with no contribution limits. Firstrade custodial accounts allow trading in stocks, ETFs, mutual funds, and bonds. Although your kids won’t have options trading privileges with Firstrade, you’re free to trade options through your own account while they watch.
Want a custodial account specifically earmarked for education funds? If you earn less than the maximum modified adjusted gross income (MAGI) for this custodial account type, Firstrade has you covered with a Coverdell Education Savings Accounts (ESA) that offers special tax benefits.
- Plans and Pricing: There’s no cost to open an account with Firstrade and no commissions on stock, ETF, or options trades.
- Account Types: Custodial investment accounts for minors under age 18, taxable investment accounts for adults, IRAs for adults, Coverdell Education Savings Accounts (ESAs) for minors, and cash management accounts for adults and minors.
- Features and Benefits: Serious traders can take advantage of value-added tools and capabilities like Morningstar research reports, streaming watchlists that update pricing information in real time, and powerful investment screeners. Firstrade also offers extended-hours trading during the morning and afternoon (U.S.) sessions.
Prepaid Debit Card That Rewards Responsible Use and Low-Cost Custodial Investment Platform
Greenlight is built around an entirely different type of custodial account: a reloadable prepaid debit card with parental controls. The Greenlight debit card is much more than play money for educational purposes only — it’s an FDIC-insured spending aid with capabilities like:
- Creating, assigning, and compensating household chores and odd jobs with customizable financial incentives via an in-app chore list
- Automating weekly or monthly transfers to up to five minor family members, all with no manual deposits required
- Notifying parents in real time whenever a Greenlight card is used online or in-person
- Setting customizable spending rules that parents can update as kids mature (or show they’re not quite ready for unsupervised spending yet)
- Allowing kids to set their own customized earning, spending, and saving goals
But that’s not all. For a few more dollars per month, Greenlight adds a kid-friendly investing platform set up in a parent’s name. Although it’s not technically a custodial investment account, it’s a big help for parents ready to show their kids how the market works. And all trades are commission-free.
- Plans and Pricing: For $4.99 per month, Greenlight’s base plan provides FDIC-insured debit cards with full parental controls for up to five kids and virtually unlimited educational potential. For $7.98 per month, Greenlight + Invest adds a taxable investment account and investing platform designed specifically for kids. For $9.98 per month, Greenlight Max offers cellphone insurance, identity theft protection, 1% cash back on eligible debit purchases, and a 2% cash-back boost on eligible savings balances.
- Account Types: Prepaid debit card with protected savings balances; taxable custodial investment account.
- Features and Benefits: In addition to the features and benefits outlined above, Greenlight Max families enjoy priority customer support and limited financial protection (purchase protection) for eligible purchases that are stolen or damaged.
Robo-Advisor With Custodial Accounts and Easy Gifting for Relatives and Others; $10 Bonus
EarlyBird makes it easy for anyone — a parent, relative, or friend — to deposit financial gifts into a custodial account, along with a personalized video message if they so choose.
As soon as those gifts hit the recipient’s account, EarlyBird puts them to work. Like many robo-advisors, EarlyBird builds semi-customized, risk-appropriate portfolios using an array of low-cost ETFs. And with SIPC insurance up to the legal maximum, EarlyBird provides some peace of mind that it’s not playing fast and loose with your child’s future — although, like all market-traded investments, its portfolios can lose value.
- Plans and Pricing: There’s no charge for the first $200 under management with EarlyBird. After that, the subscription fee is $1 per month per child. The gift processing fee is $2 per gift.
- Account Types: Custodial investment account for minors.
- Features and Benefits: EarlyBird makes it easy for relatives, friends, teachers, and anyone else to gift funds into custodial accounts — along with a personalized video or text message if they choose to share one.
Teen-Friendly Bank Account and Debit Card With Early Direct Deposit
Copper is a teen-friendly bank account that comes with a feature-rich debit card. While Copper parents can exert just the right amount of control over their kids’ spending and withdrawals, Copper is definitely designed for kids nearly ready to fly the financial coop.
How ready? Copper’s clutch early payday feature is a relief for working teens eager to get paid up to two days early. Its seamless social features make it a snap to send and receive money with friends (and parents). And an automated savings function reinforces financial hygiene by separating day-to-day spending balances from true savings.
- Plans and Pricing: It’s free to open and fund a Copper account.
- Account Types: The Copper Card is a custodial debit card for teens. Although not technically a separate account, its Automatic Saving feature helps separate day-to-day balances from funds earmarked for future expenses.
- Features and Benefits: Get paid up to two days early with direct deposit from qualifying payers. Enjoy seamless Apple Pay and Google Pay integrations. Withdraw cash at more than 50,000 fee-free ATMs nationwide.
7. Ally Bank
Full-Service Online Bank With Multiple Custodial Account Options
Ally Bank is a full-service online bank with a comprehensive lineup of adult- and kid-friendly accounts, including a brokerage that offers commission-free DIY trades and a managed portfolios option with no management fees.
Although Ally doesn’t market its custodial services as heavily as competing banks and apps built around the premise of childhood financial education or wealth-building, the fact that just about any Ally Bank account can be opened as a custodial account is welcome news for parents who already bank here.
- Plans and Pricing: Ally Bank doesn’t charge monthly maintenance fees or commissions on self-directed trades.
- Account Types: Virtually any Ally Bank account is available as a custodial account, including checking accounts, savings accounts, CDs, money market accounts, and investment accounts.
- Features and Benefits: In addition to the features and benefits outlined above, Ally Bank offers 24/7 phone support for all users, regardless of account type or balance.
8. Vanguard 529 College Savings Plan
Low-Cost Investment Account for Future Education Expenses
Although the Vanguard 529 College Savings Plan is unlike many 529 plans in that it doesn’t offer a special state income tax deduction for in-state families — chiefly because Nevada doesn’t have a state income tax — it does offer a key tax advantage common to all 529 plans: namely, investment income that grows tax-free.
No matter where you live or plan to send your kid to college, you never have to worry about paying state or federal income tax on qualifying withdrawals from this account.
Tax benefits aren’t the only selling points of the Vanguard 529 plan. With generous lifetime contribution limits and the low investment fees Vanguard investors expect from the money management giant, this product is appropriate for anyone who doesn’t want to pay more than they should to build an education nest egg for their kids.
- Plans and Pricing: There’s no cost to open an account, but all investment options come with fees and expenses. Target Enrollment portfolios’ expense ratios come in at 0.14% of assets under management; other portfolio types’ expense ratios come in between 0.12% and 0.42%.
- Account Types: 529 college savings plan (tax-advantaged investment account for qualifying education expenses).
- Features and Benefits: Like all 529 plans, the Vanguard 529 College Savings Plan offers a gift tax workaround that allows up to $75,000 in contributions per year per individual, without incurring federal gift tax — five times the usual limit.
Comprehensive Financial Platform With Custodial Investment Accounts for Kids
Stash is a comprehensive financial platform whose top plan, Stash+, offers custodial investment accounts with premium research and advice capabilities. Known as Kids Portfolios, Stash’s custodial accounts introduce kids to the equities markets without forcing parents to relinquish control just yet.
And Stash offers a slew of other benefits that parents are sure to appreciate, including up to $10,000 in life insurance coverage through Avibra.
- Plans and Pricing: For $9 per month, Stash+ offers Kids Portfolios (custodial investment accounts) with premium research and advice, along with a host of other features and capabilities. For $3 per month, Stash Growth offers a narrower range of accounts and features.
- Account Types: Custodial investment account for minors, taxable investment account for adults, bank accounts for adults, Stash Stock-Back Card (a debit card with stock rewards).
- Features and Benefits: All Stash users qualify for at least $1,000 in life insurance through Avibra. Stash+ users qualify for $10,000 in coverage.
10. Charles Schwab
Full-Service Brokerage With Commission-Free Trading and Powerful Research Tools
And with a full range of investment products available in its custodial accounts, including no-transaction-fee mutual funds, Schwab is the perfect place for parents and kids to build customized portfolios without ceding more of their hard-earned money than necessary.
Don’t have huge sums of money for your kid to invest? Schwab makes it easy to get started in the market with a (very) modest balance, thanks to a relatively new fractional share investing feature.
- Plans and Pricing: There’s no cost to open or fund a Schwab account. Stock and ETFs trade commission-free here, although other types of securities may incur trading fees.
- Account Types: Custodial investment account for kids, taxable brokerage account for adults, multiple retirement accounts (IRAs) for adults, cash management account for kids and adults.
- Features and Benefits: Invest in fractional shares ($5 increments) with Schwab Stock Slices.
With so many candidates to choose from, the prospect of selecting the right custodial account for your kids can feel overwhelming. Yet it should be clear by now that not all custodial investment accounts, bank accounts, and prepaid debit cards are created equal. Some custodial financial accounts are better than others — namely, the accounts on this list.
Financial education doesn’t begin and end with custodial accounts, though. Other teaching aids can and should play a role, from apps that reinforce key financial concepts without putting real money at risk to educational board games and even unstructured play.
A strong base of financial knowledge ensures your kids won’t have to learn on the job when the time comes for them to make their own financial decisions — at least, not to the same extent as their peers. Which reduces the chances they’ll make decisions that put your own finances at risk.