Money · August 4, 2026

How to Open a Kids Brokerage Account in 2026

Custodial brokerage accounts let you invest on a child's behalf with no age restriction and no earned-income requirement. Here is how they compare to other options.

By ByteLedger Team

A custodial brokerage account lets an adult invest money on behalf of a minor, with no age minimum for the child and no earned-income requirement, unlike a custodial Roth IRA. You open it, control the investments as custodian, and the child gains full control at the state's age of majority, typically 18 or 21. It is one of several kid-focused account types, alongside 529 plans and custodial Roth IRAs, and picking the right one depends mostly on what the money is actually for.

How it works

Choose a brokerage that offers custodial accounts. Most major discount brokerages support UGMA or UTMA custodial accounts with no minimum balance.
Decide between UGMA and UTMA, if your state offers a choice. UTMA generally allows a broader range of asset types, like real estate, to be gifted into the account; UGMA is more limited to financial assets. Most states now default to UTMA.
Open the account online. You will need your own information and the child's, including Social Security number and date of birth.
Fund it with cash or a transfer. Contributions are irrevocable gifts to the child once made; you cannot take the money back for yourself.
Invest the funds. A broad, low-cost index fund is a common choice given the long time horizon most custodial accounts have.
Plan for the handoff. At the state's age of majority, the child gains full legal control of the account and everything in it, with no restrictions on how they use it.

Custodial account vs other kid-focused accounts

Feature	Custodial brokerage (UGMA/UTMA)	529 plan	Custodial Roth IRA
Earned income required	No	No	Yes, for the child
Use of funds	Unrestricted	Education expenses (tax-advantaged)	Retirement (tax-advantaged)
Tax treatment	Some income taxed at child's rate, limits apply	Tax-free growth for qualified education use	Tax-free growth for qualified retirement use
Financial aid impact	Counted heavily as student asset	Counted, but more favorably	Generally not counted as an asset
Control transfers	At state age of majority (18-21)	Stays with account owner, usually parent	At state age of majority

A hypothetical growth example

In a hypothetical example using round numbers, contributing $100 a month into a custodial brokerage account from birth, invested in a broad index fund averaging a 7 percent annual return, would grow to roughly $43,000 by age 18. The same monthly contribution continued to age 25 would grow substantially further, illustrating why time in the market matters more than the size of any single contribution for an account with this kind of runway.

Common mistakes

Using it as the only college savings vehicle. A 529 plan usually beats a custodial brokerage account for money specifically earmarked for education, on both tax treatment and financial aid grounds.

Forgetting the irrevocability of contributions. Money placed into a custodial account is a completed, irrevocable gift to the child — it cannot be moved back to the parent later.

Not accounting for financial aid impact. Custodial account balances count heavily as the student's own asset on aid applications, more heavily than a 529 or a retirement account.

Overlooking the kiddie tax on investment income. A portion of a child's unearned investment income above a certain threshold can be taxed at the parent's rate rather than the child's.

FAQ

What is the difference between UGMA and UTMA? Both are custodial account types; UTMA generally allows a broader range of gifted asset types and has become the default in most states, while UGMA is more limited to financial assets.

Can I take money back out of a custodial account for myself? No. Contributions are irrevocable gifts to the child; withdrawals must be used for the child's benefit, not returned to the custodian.

Is a custodial brokerage account better than a 529 plan? It depends on the goal. A 529 usually wins for education-specific savings due to tax treatment and financial aid rules; a custodial brokerage account wins for flexibility, since funds can be used for anything.

What happens to the account when my child turns 18? The child gains full legal control, at the state's specified age of majority, commonly 18 or 21, with no restriction on how the money is used from that point forward.