Stocks for Kids: Best Way for Minors to Buy and Invest

I’m willing to bet that most people reading this article right now wish they started investing when they were a kid. I’m here to help you out so that the money-minded kid in your life isn’t saying the same thing in 30 years.

Even though kids can’t invest in stocks themselves, there are several accounts designed to help adults start investing on behalf of minors.

In this article, I’ll teach you how to take advantage of these accounts to help set children up for a prosperous and financially successful future.

I’ll also throw in some fun ideas for ways to get children into investing, like the best stocks for kids to get them interested and help make investing fun…

Best Stocks for Kids in 2024: The Bottom Line

Can kids invest in stocks? Not directly.

Kids can’t buy stocks themselves, so you’ll have to do your kid’s investing for them. The good news is that most major brokerages give you access to special accounts like custodial IRAs and 529 plans, so it’s really not any harder than investing for yourself.

Some types of accounts aimed at investing for kids come with annual contribution limits and restrictions on the types of assets you can purchase. I’ll discuss this more in the following section.

Can Kids Buy Stocks?

No, kids can’t buy stocks in the U.S.

Can kids invest in stocks indirectly through a parent or guardian? Absolutely!

Children under the age of 18 are not allowed to open an investment account themselves, so you’ll have to invest for your kid until they’re old enough — 18 in most states.

If you want to get your kid interested in investing, you have options. Let’s go over my three favorite types of special accounts you can use to buy stocks for your kid.

UTMA / UGMA Accounts

My favorite way to buy stocks for kids is through a Uniform Transfers to Minors Act (UTMA) or Uniform Gift to Minors (UGMA) account. These accounts allow you to act as the custodian for your kids’ investments until they turn anywhere from 18 to 25, again, depending on where you live.

There are two reasons why I think UTMA/UGMA accounts are the best way to buy stocks for kids…

1. They don’t come with annual contribution limits, although contributing more than $17,000 in a single year could trigger the federal gift tax as of 2023.
2. There are no restrictions on the types of assets you can purchase. UTMA and UGMA accounts let you buy stocks, funds, cash, and other securities — they’re basically just ordinary investment accounts. UGMA accounts also let you contribute real estate and less common assets like paintings, patents, and royalties.

UTMA and UGMA accounts also let you use the money in the account for any living expenses that benefit the child, like food, housing, and education.

Custodial IRA

Custodial IRAs are very similar to traditional or Roth IRAs, with the primary difference being that you act as the account manager until your child turns 18 or 21.

You can choose between a traditional IRA, which defers the tax burden when the money is distributed, and a Roth IRA, which taxes contributions and allows money to be withdrawn tax-free in retirement.

Just like traditional and Roth IRAs, custodial IRAs require that your child has earned income, so they’re better for teenagers with a part-time job — unless your toddler has a side gig selling Legos after preschool. You can only contribute $6,500 or 100% of your child’s earned income per year as of 2023.

Also, like traditional or Roth IRAs, your child can only withdraw money without a penalty after the age of 59.5 unless the money is used for certain approved purposes, like paying for education or buying a first home.

I like Fidelity’s Youth IRA the best. It doesn’t have any opening or closing costs, and stocks, ETFs, and options all have $0 commissions when you make purchases online — who calls a broker these days anyway?

529 Plan

If you’re looking to buy stocks for your kid with the sole purpose of paying for college down the road, a 529 plan is what you want. 529 plans are more limited than custodial IRAs and UTMA/UGMA accounts, so you might not be able to buy stocks directly.

Most 529 plans limit you to a select few ETFs and mutual funds, which is a bit of a bummer. On the bright side, many 529 plans have age-based strategies that manage the investment for you, much like target-age retirement strategies.

One of the biggest benefits of opening a 529 for your child is that the contributions are tax-advantaged. Unlike UTMA/UGMA accounts, your earnings are not taxed in a 529 plan.

Another advantage to a 529 plan is that there aren’t any contribution limits as you find in a custodial IRA. I like this aspect of 529s a lot since it lets you invest more when you can without worrying about spreading your contributions out strategically from year to year.

Best Brokerage Accounts for Kids

Now that you know what kinds of accounts you can open for your children, let’s take a look at my favorite places to open a brokerage account for your kid.

Acorns Early

Overall rating: ⭐⭐⭐⭐⭐

Account minimum: $5

Acorns Early is a UTMA/UGMA account run by the American fintech company, Acorns. Acorns Early makes it easy to manage your kid’s investments, and I love that you can link it to your own Acorns account to get access to everything in one place.

Opening an account takes less than five minutes, and you can manage the account in Acorns’ easy-to-use mobile app. If you just want an easy way to buy stocks for your kids, Acorns Early is my recommendation.

UNest

Overall rating: ⭐⭐⭐⭐⭐

Account minimum: $25/month in investments

Looking for an easy-to-use UTMA account that lets friends and family members contribute, too? Consider UNest.

The user-friendly app makes it easy to get started and set up recurring contributions so you can “set and forget” or take a more active role in investing.

Fidelity

Overall rating: ⭐⭐⭐⭐⭐

Account minimum: No minimum

Fidelity also offers a custodial UTMA/UGMA account with $0 commissions on all online stock and ETF purchases. If you already use Fidelity as your main brokerage, adding an account for your child is quick and painless.

If you prefer to open a 529 plan instead of a UTMA/UGMA account, Fidelity has you covered. I don’t necessarily recommend both types of accounts, but if you want to stay under the $17,000 per year tax-free limit, it’s nice to have the option to open a 529 without having to search for a different brokerage.

Interactive Brokers

Overall rating: ⭐⭐⭐⭐

Account minimum: No minimum for IBKR Lite clients

Interactive Brokers is one of the most popular online brokerage platforms for IRAs and taxable accounts, and the company also offers custodial accounts for parents who want to start investing for their children.

I am not as big of a fan of Interactive Brokers as I am Acorns Early or Fidelity because navigating and setting up an account with Interactive Brokers is a bit trickier. Interactive Brokers’ strong suit is the staggering number of tools it offers for experienced traders, which is great for people who want advanced features but gives its platform a much steeper learning curve.

Still, if you go for an IBKR Lite account — which is the company’s simplest offering — you can open a UTMA/UGMA account with no minimum and $0 commissions on stock and ETF trades.

M1 Finance

Overall rating: ⭐⭐⭐

Account minimum: No minimums

If none of the options I’ve presented so far strike your fancy, M1 Finance is worth a look. I put it below the other brokerages because you need to be an M1 Plus member to open a UTMA/UGMA account.

M1 Plus costs $10 per month or $95 per year if you pay for 12 months at once. While it does get you some extra goodies like advanced trading tools, access to M1’s HYSA, and on-demand crypto trading, I imagine that most people looking to buy stocks for kids are not interested in these features.

I think you’re better off with Fidelity or Acorns Early, but M1 is a good option if you don’t like those for some reason.

What Are the Best Stocks for Kids?

Can kids invest in stocks? No, but you can invest on their behalf! So you’ve opened your custodial account; now what? Here are the best stocks for kids, in my humble opinion.

Disney (NYSE: DIS)

I’m sure you’re not surprised to see The Mouse top the list. Disney (NYSE: DIS) checks all the boxes; it’s one of the best long-term investments out of any individual stock outside the tech or financial sectors and is sure to get your kid interested because — let’s be honest — have you ever met a kid that doesn’t love Disney?

While Disney’s recent dip since 2020 hasn’t recovered yet, there’s no reason to worry about the company’s future. No one comes close to Disney’s monopoly on childhood fun, and the company is well-positioned to maintain its crown as the top dog in kids’ entertainment.

Apple (NASDAQ: AAPL)

If your kid is old enough to want to be interested in investing, I’m willing to bet they have an iPhone. Or maybe an iPad? Either way, they know Apple’s (NASDAQ: AAPL) products, so they’re bound to be more invested — pun intended — than if you try to talk to them about Berkshire Hathaway.

Apple is the poster child for tech and one of the best long-term investments, period. The company’s relatively conservative approach to adopting new technologies makes it less volatile than other tech stocks, and, as you can see from its chart, it doesn’t sacrifice any gains.

Microsoft (NASDAQ: MSFT)

Continuing the theme of tech giants, Microsoft (NASDAQ: MSFT) is another must-have for your kid’s investment account. If Xbox and Minecraft can’t get your kid interested in investing, nothing will.

Microsoft’s price history is virtually identical to Apple’s, reflecting the tech and computing industry’s growth more than individual choices made by either company. I feel comfortable suggesting both stocks since they’re direct competitors and are taking different approaches to growth as we approach the mid-2020s.

Hasbro (NASDAQ: HAS)

Hasbro (NASDAQ: HAS) is the third-biggest toy company in the world, behind only Bandai Namco and the Lego Group. The company is probably responsible for some of your kid’s favorite franchises and toys, like My Little Pony, Transformers, Nerf, and Play-Doh.

I know Hasbro’s chart is not as impressive as Apple’s or Microsofts, but it still has a positive long-term outlook despite recent struggles, in my opinion. More importantly, it strikes the right balance between being interesting for kids and making a sound investment.

Amazon (NASDAQ: AMZN)

Ok, that’s enough of a break from mammoth tech stocks. Amazon (NASDAQ: AMZN) has pulled back further than some of its tech brethren from its pandemic highs, but that doesn’t mean it’s not a strong buy.

Amazon is still the largest online retailer, and it’s one of the top providers of cloud computing services, which gives it more upside than most companies as we become more dependent on the internet and big data.

Oh yeah, it’s also probably familiar to your kids. If your children haven’t directly ordered anything from Amazon themselves, I’m sure they’ve begged you to order countless things for them, so adding it to their basket should help hold their interest.

McDonald’s (NYSE: MCD)

It’s ok to admit that you’ve taken your kids to McDonald’s (NYSE: MCD) in 2024; this is a safe space. Even though more people are advocating for healthier dining options these days, McDonald’s stock is doing better than ever. Hmm, curious. I mean, just look at this chart:

McDonald’s has been on an absolute tear since the pandemic, logging a mammoth 140% gain since its 2020 lows. While I certainly don’t know what the far future holds for Ronald McDonald and company, I feel comfortable saying that Happy Meals will probably be a good investment for a while.

Netflix (NASDAQ: NFLX)

Kids love watching Netflix (NASDAQ: NFLX), and adults love watching Netflix’s stock price. Despite some recent struggles, Netflix appears to be in recovery, and the streaming company is still at the top when it comes to original shows and movies.

Whether you feel comfortable putting some money in a stock that’s shown some weakness lately is up to you, but there’s something to be said that Netflix still competes even as it seems like every company in the world is releasing its own streaming service.

Final Word: Stocks for Kids

So, can kids buy stocks? Unfortunately, no. However, even though kids can’t invest in stocks themselves, they can still get experience and learn about investing by working with a parent through a custodial account.

Before you start researching the best stocks for kids, open the right account. I recommend UTMA/UGMA accounts for most parents since they have the fewest restrictions and are the most similar to ordinary brokerage accounts.

If you want to set up an account to help pay for your child’s education, you can also open a 529 Plan to help pay for school-related expenses.

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