Investing money on behalf of children or other minors with a custodial account gives you a tax break. NerdWallet’s best custodial brokers offer low fees, user-friendly platforms and good legal compliance. Acorns’ UGMA/UTMA investment account can be opened in minutes and has no minimum. Vanguard, on the other hand, offers excellent low-cost index funds and brokerage services.
Acorns
Acorns offers a variety of ways to invest for kids. The company’s robo-advisor, Acorns Invest, allows parents to open custodial accounts for their children with as little as $5. These accounts can be accessed once the child turns 18. Acorns also offers a savings account that has no fees, and a checking account with a generous APY.
Acorn’s newest feature, Early, is an investment account that opens UTMA/UGMA custodial accounts for minors. These accounts allow multiple kids to be added at no additional cost, and they can automatically invest every month with a set amount of their own money. In addition, the Acorns website features a wide selection of helpful educational resources to teach kids about investing basics, taxes, micro-investing, and inflation.
Although Acorns doesn’t offer human investment advisors, it does provide customer support via phone and email. Its app is easy to use, and the company has a good reputation among its customers. Its biggest drawback is the fee structure, which can be expensive for those with low balances.
Acorns has a free tier that lets users passively invest their spare change by rounding up purchases, and a paid tier with more advanced investing options. The Personal tier costs $3 per month, while the Premium tier runs $9 a month and adds access to Acorns Later for retirement savings and Acorns Checking, an FDIC-insured checking account with mobile deposit and ATM access. It also offers higher rewards match, custom portfolios, and a benefits hub.
Ally Bank
If you’re looking for a custodial account with competitive offerings, Ally Bank is worth considering. This online-only banking service provides a number of options that can help your children grow their wealth. They also promise no hidden fees, which is a nice touch. However, if you need a physical branch to visit or want to invest in precious metals, Ally might not be for you.
Ally offers an online savings account for minors with a 4.20% APY and no minimum balance requirement. They also offer an IRA with no contribution limits or taxes linked to withdrawals. You can also deposit funds using Ally eCheck Deposit, direct deposits, online transfers and wires. In addition, Ally carries a full suite of mobile banking apps that are highly-rated on Apple and Android.
Unlike some other custodial accounts, Ally doesn’t charge any account or maintenance fees for these types of accounts. They also offer a number of perks, including free trades and no monthly fees for self-directed trading. They even have a customer support team that can help with your questions.
Ally also makes it easy for grandparents, friends and other relatives to open UTMA or UGMA accounts for children. This is a great way to build long-term wealth for the next generation, while teaching them about investing at an early age. It is important to note that once the child reaches adulthood, these accounts can be converted to noncustodial status, giving them complete control of their money.
Vanguard
Vanguard offers custodial brokerage accounts that allow adults (the “custodian”) to invest money on behalf of children and/or dependents. These accounts can hold financial assets, such as cash, stocks, mutual funds, ETFs, and bonds. They can also hold personal property like real estate or precious coins. Adults can manage the account, but the final decision on how to use the investments belongs to the child or dependent.
Custodial accounts are popular among parents who want to teach their kids about investing and save for future expenses. They can be opened with most major stock brokerages and offer tax benefits. However, it’s important to research the fees and services before choosing a provider. Look for a company with low investment fees and no minimum initial deposit. It’s also a good idea to compare the options available in each type of custodial account.
Vanguard is an industry leader in low-cost index funds and has a wide selection of low-cost stocks and ETFs. Its trading platform is basic, but it has all the essential tools you need to buy and sell stocks and mutual funds. Vanguard also has a good selection of bond investments, including Treasurys, municipal bonds, corporate bonds, and preferred bonds. Its bond portfolio also includes Admiral Shares, which offer lower expense ratios than the company’s regular fund share classes.
Charles Schwab
Schwab offers a variety of custodial account options, including the Schwab One Custodial Account, which is a full-service brokerage that comes with investment help and guidance. This account features $0 minimum opening deposit, $0 account setup and maintenance fees, and commission-free online stock and ETF trading. It also offers a variety of investment tools and research, as well as Schwab Stock Slices, which allows you to buy fractional shares starting at $5. Schwab also offers a variety of custodial IRA accounts, 529 college savings plans, and retirement calculators.
Ally Financial is another option that offers a custodial account with a focus on app-based trading and lower fees and minimums. Its Ally Invest Robo Portfolios service is a great choice for investors looking to put their investments on autopilot, with a diversified portfolio of low-cost ETFs that are monitored and automatically rebalanced. Ally Invest also offers an excellent selection of mutual funds and is among the few brokers to charge no fees for mutual fund trading.
When it comes to investing for a child, choosing the best custodial account can be tricky. You want to choose an account with low fees, a convenient mobile app, and a wide range of options for investors at all experience levels. NerdWallet’s ratings of the best custodial account providers take into account account fees and minimums, investment choices, customer support, and mobile app capabilities.
