Meta Description: Learn how to start investing for kids in 2025. Complete guide to UGMA/UTMA accounts, teen investing apps, tax rules, and age-appropriate investment strategies for children.

Picture this: Your teenager comes home excited about a stock they heard about on social media. Instead of panicking about TikTok investment advice, you smile—because you’ve already laid the groundwork for their financial education through years of hands-on investing experience.

Starting your child’s investment journey early isn’t just about building wealth (though compound interest over decades is incredibly powerful). It’s about teaching financial literacy, patience, and long-term thinking in an age when everything feels instant. With new investment platforms designed specifically for kids and updated tax rules in 2025, there’s never been a better time to help your child become a savvy investor.

The Modern Landscape of Kids Investing

Why Start Early in 2025?

The investing world has dramatically changed since many parents first learned about stocks and bonds. Today’s children grow up in a digital economy where financial literacy is more crucial than ever. Recent surveys show that 43% of children use social media to learn about investing, and 25% show interest in cryptocurrency—highlighting both the opportunity and the need for proper guidance.

Starting early provides several advantages:

• Time advantage: Children have decades for compound growth
• Educational benefits: Real-world financial literacy lessons
• Lower stakes learning: Mistakes with small amounts teach valuable lessons
• Building discipline: Regular investing habits formed early last a lifetime

Updated Legal Framework

The foundation for kids investing remains the Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA), but the landscape has evolved significantly. In 2025, these custodial accounts offer more flexibility and access to modern investment platforms than ever before.

Choosing the Right Account Type for Your Child

UGMA vs. UTMA: The Basics

UGMA (Uniform Gifts to Minors Act) accounts can hold:

• Cash and savings
• Stocks and bonds
• Mutual funds and ETFs
• Insurance policies

UTMA (Uniform Transfers to Minors Act) accounts include everything in UGMA plus:

• Real estate
• Intellectual property
• Artwork and collectibles
• Other tangible property

All states have adopted UGMA, while all states except Vermont and South Carolina have adopted UTMA. Where both are available, UTMA generally supersedes UGMA and offers more flexibility.

Key 2025 Updates for Custodial Accounts

Gift Tax Limits: Individuals can contribute up to $19,000 per year ($38,000 for married couples) without triggering gift tax obligations—up from previous years.

Age of Majority: Varies by state but typically ranges from 18-21 for UGMA and 18-25 for UTMA. Some states allow customization of the termination age.

Account Minimums: Most major brokerages now offer $0 minimum account openings, making it easier to start small.

Alternative Account Types

529 Education Savings Plans: While primarily for education, custodial 529 plans offer:

• Tax-free growth when used for qualified education expenses
• Lower impact on financial aid (counted as parent assets, not student assets)
• No kiddie tax implications

Teen-Owned Accounts: Platforms like Fidelity Youth® now offer accounts that teens aged 13-17 can own themselves (with parental oversight), providing more autonomy and engagement.

Modern Investment Platforms and Apps for Kids

Traditional Brokerages with Kids Options

Fidelity Youth®

• Age range: 13-17 years old
• Features: Teen-owned account with parental oversight, free debit card, educational content
• Investment options: Stocks, ETFs, mutual funds with $1 minimums
• Cost: $0 account fees, $0 trading commissions

Vanguard UGMA/UTMA

• Features: Access to low-cost index funds and ETFs
• Strengths: Industry-leading low expense ratios
• Considerations: Limited to Vanguard investment options

Charles Schwab Custodial Accounts

• Features: No account minimums, extensive research tools
• Investment options: Stocks, ETFs, mutual funds
• Educational resources: Comprehensive learning center

Micro-Investing and Kid-Focused Platforms

Greenlight + Invest

• Monthly fee: $7.98/month (includes debit card and investing features)
• Features: Real-time parent approval for trades, educational games, chore management
• Investment options: Individual stocks and ETFs with fractional shares
• Age range: All minors with parent as custodian

Acorns Early

• Part of Acorns Gold ($12/month) family plan
• Features: Kid-friendly debit cards, budgeting tools, round-up investing
• Investment approach: Automated portfolio investing based on age and risk tolerance

Stockpile

• Features: Gift cards for stocks, fractional shares starting at $5
• Integration: Works with BusyKid for allowance management
• Educational focus: Stock research tools designed for young investors

UNest

• Features: Age-based investment portfolios (Conservative, Moderate, Aggressive)
• Gifting platform: Friends and family can contribute easily
• Investment approach: Diversified ETF portfolios managed professionally

Comparison of Modern Platforms

Platform	Monthly Fee	Minimum Investment	Key Advantage
Fidelity Youth®	$0	$1	Teen autonomy with oversight
Greenlight + Invest	$7.98	$1	Comprehensive family financial platform
Acorns Early	$12 (family plan)	$5	Automated micro-investing
Stockpile	$0.99-$4.95/month	$5	Gift stocks, kid-friendly interface
UNest	$3/month	$25	Age-based professional management

Investment Strategies by Age Group

Ages 5-10: Foundation Building

Focus: Basic money concepts and habit formation

Recommended investments:

• Broad market index funds (S&P 500 ETFs)
• Target-date funds
• Companies they know and understand (Disney, Apple, Nike)

Engagement strategies:

• Let them choose between 2-3 pre-selected options
• Use visual aids to show how money grows
• Start with small, regular contributions ($10-25/month)

Platform recommendation: UNest or custodial account with simple portfolio

Ages 11-14: Active Learning

Focus: Understanding markets and building analytical skills

Investment approach:

• 70% diversified index funds
• 20% individual stocks they research
• 10% sector ETFs (technology, healthcare, etc.)

Educational activities:

• Research companies before buying stocks
• Track portfolio performance monthly
• Learn about different investment types

Platform recommendation: Greenlight + Invest for hands-on learning with safety rails

Ages 15-18: Pre-Adult Preparation

Focus: Real-world investing skills and independence

Investment strategy:

• 50% broad market funds
• 30% individual stock picks
• 10% international exposure
• 10% emerging trends (clean energy, technology)

Advanced concepts:

• Dollar-cost averaging
• Rebalancing portfolios
• Understanding risk and return
• Tax implications of investing

Platform recommendation: Fidelity Youth® for maximum autonomy with oversight

Understanding the 2025 Kiddie Tax Rules

Updated Tax Thresholds

The kiddie tax rules have been updated for 2025:

Tax-free threshold: First $1,350 of unearned income is tax-free Child’s rate: Next $1,350 ($1,351-$2,700) taxed at child’s rate Parent’s rate: Amounts above $2,700 taxed at parent’s marginal rate

Who’s Subject to Kiddie Tax?

• Children under 18 at year-end
• Full-time students ages 19-23 with unearned income exceeding thresholds
• Dependent children who didn’t provide more than half their own support

Tax Planning Strategies

Keep unearned income under $2,700: Monitor dividend and interest income to stay below the threshold where parent’s rates apply.

Prioritize growth over income: Choose growth stocks over dividend-paying stocks to minimize current taxable income.

Use tax-advantaged accounts: 529 plans are exempt from kiddie tax rules.

Consider timing: Realize gains and losses strategically to manage annual tax impact.

Filing Requirements

Child files separately: Use Form 8615 if unearned income exceeds $2,700

Include on parent’s return: Option available if child’s gross income is less than $13,500 using Form 8814

Practical Implementation Guide

Step 1: Choose Your Account Type

For education-focused savings: 529 plan For maximum flexibility: UGMA/UTMA account For teen autonomy: Fidelity Youth® or similar teen account For family financial education: Greenlight + Invest

Step 2: Select Your Platform

Consider these factors:

• Fees: Monthly fees vs. trading commissions
• Investment options: Individual stocks vs. ETFs vs. managed portfolios
• Educational resources: Learning games, research tools, financial literacy content
• Age appropriateness: Interface design and complexity level
• Parent controls: Level of oversight and approval required

Step 3: Start Small and Build

Initial investment: $25-100 to start (most platforms have no minimums) Regular contributions: $25-50 monthly from allowance, gifts, or family contributions Special occasions: Birthday and holiday gifts can boost the account Earned income: Teens can contribute from part-time jobs

Step 4: Create Learning Opportunities

Weekly check-ins: Review portfolio performance and discuss market movements Stock research projects: Have kids research companies before investing Goal setting: Establish short and long-term financial objectives Real-world connections: Connect investments to products they use daily

Age-Appropriate Investment Education

Elementary School (Ages 5-10)

Core concepts:

• Money doesn’t grow on trees—it has to be earned or invested
• Saving means not spending money now to have more later
• Companies sell shares to raise money for their business
• When companies do well, their stock prices can go up

Teaching methods:

• Use piggy banks and clear savings jars
• Play simple board games like Monopoly
• Read age-appropriate books about money
• Let them “buy” stocks in companies they know

Middle School (Ages 11-14)

Core concepts:

• Risk and return relationship
• Diversification basics
• Economic cycles and market volatility
• Research and analysis fundamentals

Teaching methods:

• Start a family investment club
• Use investment simulators and games
• Research companies together
• Discuss current events and their market impact

High School (Ages 15-18)

Core concepts:

• Portfolio construction and asset allocation
• Tax implications of investing
• College planning and 529 accounts
• Long-term wealth building strategies

Teaching methods:

• Give them more control over investment decisions
• Introduce complex concepts like compound interest calculations
• Discuss career planning and financial goals
• Practice with real money and real consequences

Common Mistakes to Avoid

Overcomplicating Early Investments

The mistake: Starting with complex strategies or too many choices The solution: Begin with simple, broad market index funds and add complexity gradually

Focusing Only on Returns

The mistake: Obsessing over daily portfolio performance The solution: Emphasize long-term growth and learning over short-term gains

Not Involving the Child

The mistake: Managing everything yourself without child input The solution: Age-appropriate involvement in all investment decisions

Ignoring Tax Implications

The mistake: Not considering kiddie tax rules when making investment choices The solution: Plan investment types and amounts with tax efficiency in mind

Choosing the Wrong Platform

The mistake: Selecting based on adult needs rather than child’s learning style The solution: Prioritize educational features and age-appropriate interfaces

Advanced Strategies for Committed Families

The Three-Bucket Approach

Bucket 1 – Spending (20%): Money for immediate wants and needs Bucket 2 – Saving (30%): Short-term goals and emergency fund Bucket 3 – Investing (50%): Long-term wealth building

Family Investment Club

• Meet monthly to discuss portfolio performance
• Each family member researches and presents investment ideas
• Vote on new investment decisions
• Track progress toward family financial goals

Graduation Strategy

Ages 5-10: Parent-managed with child input Ages 11-14: Joint decision-making with educational focus Ages 15-17: Child-led with parent oversight Age 18+: Full transfer of control with continued mentoring

College Financial Aid Considerations

Asset Impact on Financial Aid

Student assets: Assessed at 20% for Expected Family Contribution (EFC) Parent assets: Assessed at maximum 5.6% for EFC 529 plans: Counted as parent assets even if owned by child

Strategic Planning

Spend student assets first: Use UGMA/UTMA funds before other college savings 529 plan advantages: Lower financial aid impact and tax benefits Timing considerations: Large gains taken in senior year can affect aid for sophomore year

Frequently Asked Questions

Q: Should I open a UGMA/UTMA or focus on 529 plans?

A: For college-bound children, 529 plans offer tax advantages and better financial aid treatment. UGMA/UTMA accounts provide more flexibility but less tax efficiency. Many families use both—529s for education and UGMA/UTMA for general financial education and non-education goals.

Q: How much should I invest for my child?

A: Start small with whatever you can afford regularly. Even $25/month can grow significantly over time. The key is consistency and using investing as a teaching tool rather than focusing solely on the amount.

Q: What if my child wants to invest in risky individual stocks or cryptocurrency?

A: Set limits on speculative investments (perhaps 10-20% of their portfolio) and use these as learning opportunities. Let them make small mistakes with small amounts while the majority of their investments remain in diversified funds.

Q: When should I transfer control of the account to my child?

A: Most custodial accounts transfer automatically at the age of majority (18-25 depending on state and account type). However, you can begin giving them more decision-making power gradually throughout their teens.

Q: How do I handle taxes on my child’s investment income?

A: For 2025, the first $1,350 is tax-free, the next $1,350 is taxed at the child’s rate, and amounts above $2,700 are taxed at your rate. Keep good records and consider consulting a tax professional for larger accounts.

Technology Tools and Resources

Investment Tracking Apps

• Personal Capital: Free portfolio tracking across multiple accounts
• Mint: Budgeting and goal tracking
• YNAB (You Need A Budget): Advanced budgeting for older teens

Educational Resources

• Khan Academy: Free courses on personal finance and economics
• Investopedia Simulator: Risk-free stock market simulation
• BizKid$: Educational videos about business and investing
• Practical Money Skills by Visa: Age-appropriate financial curricula

Books by Age Group

Ages 5-10:

• “The Berenstain Bears’ Dollars and Sense” by Stan and Jan Berenstain
• “A Chair for My Mother” by Vera Williams

Ages 11-14:

• “The Everything Kids’ Money Book” by Brette Sember
• “Growing Money: A Complete Guide to Teaching Your Kids” by Gail Karlitz

Ages 15-18:

• “The Richest Man in Babylon” by George Clason
• “The Bogleheads’ Guide to Investing” by Taylor Larimore

The Long-Term Vision: Building Financial Citizens

Teaching children to invest isn’t just about building wealth—it’s about creating financially literate citizens who understand markets, can delay gratification, and make informed decisions. In a world where financial scams target the young and inexperienced, early education is protection.

The Compound Effect of Early Education

A child who starts investing at age 10 with $50/month could have over $800,000 by retirement, assuming historical market returns. But more importantly, they’ll have 50+ years of experience making financial decisions, learning from mistakes, and understanding how markets work.

Beyond Money: Life Skills

Investment education teaches:

• Research skills: Learning to analyze information and make decisions
• Patience: Understanding that good things take time
• Risk management: Balancing potential rewards with possible losses
• Goal setting: Working toward long-term objectives
• Math and economics: Real-world application of academic concepts

Taking Action: Your Next Steps

This Week

1. Assess your child’s current financial knowledge and interest level
2. Research platforms that match your family’s needs and values
3. Set a monthly investment budget that fits your family finances
4. Choose your first account type based on your primary goals

This Month

1. Open the account and make your first investment together
2. Establish regular contribution schedule (monthly is ideal)
3. Create a simple tracking system (spreadsheet or app)
4. Start age-appropriate education about the investments you’ve chosen

This Year

1. Build consistent habits around reviewing and discussing investments
2. Expand investment options as your child’s knowledge grows
3. Celebrate milestones and learning achievements
4. Plan for increasing complexity as your child matures

The Bottom Line: Start Today, Think Decades

The best time to start investing for your child was when they were born. The second-best time is today. With modern platforms making investing more accessible than ever and updated tax rules providing clear guidance, there’s no reason to delay this crucial financial education.

Remember: the goal isn’t to create the next Warren Buffett (though that would be nice). The goal is to raise a financially literate adult who understands that money is a tool, investing is a skill, and patience plus compound interest can create life-changing wealth over time.

Your child may lose $80 in their bedroom today, but with the right investment education, they’ll never lose track of building their financial future. The lessons they learn from watching their first $100 investment grow into $200, then $500, then more, will stay with them for life—and that’s worth more than any amount of money you could ever give them.

Ready to start your child’s investment journey? Choose a platform that matches your family’s goals and values, start with an amount you’re comfortable with, and remember that the most important investment is the time you spend educating your child about money. The earlier you start, the more time compound interest—and compound learning—has to work its magic.