Helping your children invest in stocks can set them on a path toward financial independence. It allows them to learn valuable investing skills and gives them enough time to fully utilize the power of compounding to grow their investments into significant sums by adulthood.

This article covers everything you need to know about how to invest in stocks for kids. It answers the “Can a minor invest in stocks?” question and discusses your role in facilitating your children’s investments.

Can Minors Invest in the Stock Market?

Yes, minors can invest in the stock market, but not independently. Buying and selling stocks involves signing contracts, and minors can’t legally enter into contracts. That’s why brokerages don’t let them open accounts.

If you want your child to invest in the stock market, you need to open a stock investment account on their behalf. You also have to manage the account by creating short- and long-term investment goals, buying and selling stocks, developing a tax strategy, and ensuring the returns are used to their benefit. Your degree of involvement depends on their age, investing experience, and other factors.

While it requires effort on your part, managing the account gives you an opportunity to show your child how to invest in stocks, analyze investments, and maximize the benefits of compounding, among other valuable investing skills.

How To Invest in Stocks for Minors

Here are the investment accounts you can open for your child to help them start investing in stocks:

1. Custodial brokerage account
2. Guardian brokerage account
3. Jointly-owned brokerage account
4. Teen-owned brokerage account
5. Custodial Roth IRAs
6. 529 plan

Custodial Brokerage Account

A custodial account is a type of investment account that allows you to save and invest on behalf of your child. The money and investments in the account belong to the child, and when they become a legal adult, they assume full access and control of the account and can spend the cash as they wish.

There are two main types of custodial brokerage accounts:

• Uniform Transfers to Minors Act (UTMA) accounts—Can hold any type of investments from real estate to patents. UTMA accounts aren’t available in South Carolina and Vermont
• Uniform Gifts to Minors Act (UGMA) accounts—Can only hold stocks, cash, insurance products, and mutual funds

A custodial account provides tax benefits on earnings as follows:

Earnings per Year	Tax Rate
$0–$1,250	Tax-exempt
$1,250–$2,500	Child’s tax rate
$2,500 and above	Parent’s tax rate

Before your child receives full control of the account, you can only withdraw funds to cover expenses that directly benefit them, such as healthcare and education costs.

Guardian Brokerage Account

A guardian brokerage account allows you to educate your child about stock investing without giving them ownership of the investments and returns. 

Unlike a custodial account, you open a guardian brokerage account in your name. This means you own all the assets in the account, and their earnings are taxed at your rate. You can add your child’s name to the account, but they’ll have no legal standing and won’t automatically assume ownership after becoming an adult.

Jointly-Owned Brokerage Account

You can own a jointly-owned brokerage account with your child to invest in stocks. You’ll share owner rights evenly with your child and have the same control over the funds and investments. This account provides the widest range of investing options.

All account holders in a jointly-owned account have an equal say in the investment decisions. You can use the account to empower your child to make investment decisions by gradually increasing their share of account authority over time.

Teen-Owned Brokerage Account

Teen-owned brokerage accounts were introduced by Fidelity, a stock broker. They allow teens aged 13–17 to start investing in stocks on their own, making them an excellent choice if you want your child to take on a more active role.

The teen owns the account and everything in it and can make all investment decisions independently. However, you must open the account on their behalf, and you can monitor their trades and transactions in the Fidelity Youth app.

Your child can use the app to invest in stocks, learn how to invest using the available educational resources, and learn how to save through the Money Bucket feature, which automates savings towards different objectives.

Custodial Roth IRAs

Custodial Roth IRAs can help your child invest in the stock market indirectly to save for education expenses and retirement. The only requirement is that they must have earned income from any job, be it mowing lawns, babysitting, or being employed part-time.

You can buy stocks on your child’s behalf and place them in the Roth IRA. Stocks have much stronger returns than other typical Roth IRA investments, so they allow you to maximize the tax-free profits for your child’s benefit.

Your child can withdraw the contributions (not earnings) to pay for education, investments, or any other expenses without tax or penalties. If they withdraw earnings before retirement, they’ll be taxed and penalized.

529 Plan

If you want your children to invest in stocks to secure their future education financing, a 529 savings and investing plan is an excellent option.

With a 529 plan, you don’t invest in stocks directly. Instead, your 529 provider of choice invests your contributions and savings in a preselected range of investments like mutual funds and ETFs. This means you don’t have a say in what stocks or funds your child invests in, so their portfolio can be quite limited.

You remain the owner of the assets and in charge of the investment decisions, but you can only spend the funds on the child’s education expenses, such as tuition, fees, room and board, and books.

How a Child’s Credit Score Can Affect Their Ability To Invest

Many investors known for the best stock market trades in history needed to borrow to place the trades.

As your child reaches adulthood, they may need loans to make bigger investments. If they have a poor credit score, they may not be approved for investment loans or receive favorable terms, which can make them miss out on lucrative opportunities. So, to ensure future success as investors, your child needs to start building their credit when they’re still a minor.

Still, like with investing in the stock market, minors need parents’ help to build credit. This is because the CARD Act of 2009 doesn’t allow people under 21 to obtain a credit card.

While you can add your child to your credit card as an authorized user, it’s not a good solution for the following reasons:

• Your child isn’t building credit—they’re piggybacking on yours
• As an authorized user, your child can legally use your credit card at their discretion, so they can harm your credit profile by overspending
• When your child is removed as an authorized user, their credit history is deleted, and they have to start over

You can circumvent these limitations by using FreeKick, a platform that offers a parent-sponsored credit building program for children aged 13–25. With FreeKick, you can help your children establish good credit early, which can save them over $200,000 throughout adulthood and give them access to the loans they may need to execute major stock trades.

FreeKick—The Best Credit Building and ID Protection Solution

FreeKick is an FDIC-insured deposit account and subscription service powered by Austin Capital Bank. It meets two critical needs for parents and their children:

1. Credit building for minors and young adults
2. Identity monitoring, protection, and restoration for the whole family

Start Building Credit Early With FreeKick

FreeKick allows you to start building a credit profile and permanent credit history for your children when they’re as young as 13. It doesn’t rely on or affect your credit, and when they become legal adults, it jumpstarts their credit score and profile with up to five years of history. To get started, follow these steps:

1. Create an Account—Go to FreeKick.bank, open an account, and make a one-time FDIC-insured deposit with a 12-month commitment
2. Set It and Forget It—Pick a plan that best fits your budget and financial goals, and FreeKick will automatically build your child’s credit over the next 12 months
3. Keep Growing—After the first 12-month period ends, you can either close the account and get 100% of your deposit back or renew it and keep building your child’s financial future

If you cancel the account before your child becomes an adult, no credit can ever be reported for the account.

Protect Your Family’s Identity With FreeKick

Shocking statistics reveal that a child’s identity is stolen every 30 seconds, which is why protecting your child’s identity is as important as building their credit. Child identity theft can go on undetected for years, leading to serious consequences that can destroy the bright financial future you’re trying to build for your child, including tax issues, a criminal record, and a lower credit score.

FreeKick allows you to protect your family from identity fraud. It offers comprehensive identity monitoring, protection, and restoration services that cover up to two adults and six children aged 0–25 to reduce the risk. Here’s what each service includes:

Services for Adult Children and Parents	Services for Minors
Credit profile monitoring SSN monitoring Dark web monitoring for personal information Up to $1 million identity theft insurance Full-service white-glove concierge credit restoration Lost wallet protection Court records monitoring Change of address monitoring Non-credit (Payday) loan monitoring Free FICO® Score monthly FICO® Score factors Experian credit report monthly	Credit profile monitoring SSN monitoring Dark web monitoring for children’s personal information Up to $1 million identity theft insurance Full-service white-glove concierge credit restoration Sex offender monitoring—based on sponsor parent’s address

FreeKick Pricing

FreeKick offers two different pricing plans to accommodate various family budgets and needs. Deposits on both plans are FDIC-insured up to $250,000. Find the plan details in the table below:

FDIC-Insured Deposit Amount	Plan Fee
$3,000	$0 (Free)
No deposit	$149/year

To help your children establish good credit early and reduce the risk of identity theft for your family, sign up for FreeKick today.