Investing for kids - InvestSMART (2024)

FAQs

Where is the best place to invest money for children? ›

The Public Provident Fund is a government best investment plan for child future where the rate of interest is declared quarterly. It delivers a higher rate of interest than FD or saving accounts with a maturity period of 15 years. It has a long lock-in period, making it a perfect tool for long-term children's savings.

A Roth IRA for a child needs to be started and managed by a parent or other adult as a custodial account. The child needs a Social Security or other tax identification number, plus earned income. The Roth IRA stays a custodial account until the child reaches the age of majority, which is 18 in most states.

Since CDs typically earn higher annual percentage yields (APYs) than standard saving accounts, opening a CD can help your child's savings grow faster. You might also purchase a CD to give to your child or provide a head start on paying for a first car, wedding or other big goal.

A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.

You can open a custodial brokerage account at a bank or brokerage firm. A custodial account can be a great way to save on a child's behalf, or to give a financial gift.

If you want to teach your child basic money management habits, a children's savings account will be better. If your goal is to save for a child's education, you'd likely be better off with a 529 plan or a Coverdell Education Savings Account.

Any age is a perfect age to start a child's investment account, but kids will learn the most from the account around age eight or older. The benefit of starting at a younger age is that the account has more time to grow.

Where to invest a lump sum for a child? ›

Junior ISA: A Junior ISA (JISA) is a long-term tax-efficient savings plan opened by a parent or legal guardian to invest in their child's future, allowing them to receive a tax-free lump sum once they've turned 18. There are options to save in a cash Junior ISA, or invest in a stocks and shares Junior ISA.

UTMA custodial account – A uniform transfers to minors act (UTMA) custodial account lets you establish and manage assets for your child, including stocks and other securities. Once the account is established on behalf of your child, the assets are considered irrevocable gifts that belong to them.

Because minors are not eligible to open their own brokerage accounts, parents and guardians can open and manage custodial accounts in a child's name. Teaching children about how to manage, save, invest, and spend money may help them to establish and enjoy a solid financial future.

The top performers in Barron's fund families ranking—Putnam Investments in the top slot, followed by Fidelity Investments, PGIM Investments, Virtus Investment Partners, and Touchstone Investments—did just that for most of their investors.

While not the flashiest gifts, I bonds are a safe investment designed to keep pace with inflation. They grow for decades and can provide kids with a source of cash as they transition to adulthood.