Top 10 Custodial Brokerage Accounts for Your Kids
Basic Information About the Accounts
Opening custodial brokerage or investment accounts are among the easiest and smartest ways of giving your kids under the age of 18, the investing training wheels they need to secure a strong financial future. You can use these accounts to teach your kids how to invest in stocks, exchange-traded funds, mutual funds, and other assets.
Though you establish and control all investments in the accounts, the assets belong to your kids and they take control of these assets when they turn 18 or 21 (depending on the state in which you reside).
For information on the details of custodial brokerage accounts and how to open them, CLICK HERE.
Incidentally, many parents use custodial brokerage accounts as a way to teach their kids how to invest in the stock market. You may also want to consider having them take The TeenVestor Stock Certification Course created specifically for aspiring teen investors. Click on the image below for more information or on the 55-second video below for a summary of the course.
List of the Top 10 Custodial Brokerage Accounts
In general, we value companies that 1) charge no fees for trading stock, 2) require low to no minimum balance in trading accounts, and, 3) allow investors to buy fractional shares, which means that they can buy a small fraction of expensive stock such at Tesla which is currently over $1,000 per share.
To help you choose the right custodial brokerage account, here is a list of 10 online brokers that offer the best accounts for your kids! After the list, we give more details below about each company’s specific offerings. For example, we describe the Fidelity Youth Account — an innovative account for teen investors established by Fidelity in 2021.
Details of Each Custodial Brokerage Account
1. Charles Schwab (Now Owns TD Ameritrade)
Charles Schwab is ideal for beginner investors and investors in search of no-minimum index funds. Charles Schwab has a $0 account minimum, $0 maintenance fees, and a $0 commission for stock and ETFs (Exchange-Traded Funds (ETFs). This makes it ideal for both active traders and testing-the-waters investors.
Individuals with Charles Schwab custodial accounts gain access to over 4,000 non-transaction fee mutual funds with low expense ratios of 0.50% or below.
In addition, Schwab offers quite a few trading platforms, including StreetSmart Edge, StreetSmart Central, and Schwab Mobile apps.
While this all sounds like the perfect deal, Charles Schwab falls short on sweep rates and charges high fees for mutual funds. Furthermore, you can only trade assets available on Canadian and US exchanges. International versions of Schwab require a minimum deposit of $25,000. However, this is not important for kid investors.
Pros
● Offers fractional shares
● No minimum open deposit
● No maintenance fees
● No online stock and ETF commissions
● Reputable company with a long history
● Brilliant research and data
Cons
● Doesn't allow cryptocurrency trading
● High fees for some mutual funds
● Uninvested cash is transferred into an account paying 0.01%
2. E*TRADE
E*TRADE is among the most popular online brokers, and it's easy to see why. Alongside the company's $0 commission, it also offers powerful trading platforms (E*TRADE Web and Power E*TRADE) and exemplary educational resources. Plus, it has a large mutual fund and investment selection.
Unfortunately, E*TRADE only covers US markets and doesn't accept electronic wallets and credit/debit cards for money transfers, making the gifting process quite a pain. If you want to trade via debit, you'll have to use the Apple Pay app.
With that said, E*TRADE excels in a ton of other aspects. For instance, it doesn't charge any transaction fees on more than 1,300 no-load mutual funds.
It also has a minimum investment of $0 and a stock trade of $0. However, there's still a $0.65 contract fee for options, which is reduced to only $0.50 for 30+ trades per quarter.
Pros
● Multiple account types for investments
● Commission-free trading
● Intuitive app
● Professional-grade trading tools
Cons
● Does not offer fractional shares (except for dividend reinvestments)
● Directed towards active traders
● Bank and Apple Pay transfers only
● Doesn't allow Foreign Exchange (forex) trading
3. Fidelity
Founded in 1946, Fidelity is a reputable US discount broker regulated by well-known financial authorities like the FCA (Financial Conduct Authority) and the SEC (Securities and Exchange Commission).
The company covers a ton of tools and offers in-depth trading ideas data alongside premium research. Fidelity gives you access to multiple resources to help you invest wisely and with the least risk possible.
When you log into your account, you’re given thorough investment analysis and reports from some of the biggest stock organizations in the world.
Fidelity offers no account fees, no account minimum, and commission-free stock. Like Charles Schwab, it has an expense ratio of 0.50% or less on its mutual funds.
There is an innovative account for kids between the ages of 13 and 17 offered by Fidelity called the Fidelity Youth Account. This account can be opened by parents who already have a Fidelity brokerage account. With the account, kids can more easily make trading decisions while their parents are given the ability to monitor their activities.
Pros
● Offers fractional shares and options trading
● No minimum open deposit
● No maintenance fees
● No online stock trading commissions
● Fantastic platform
● Stock research from 20 third-party providers
Cons
● Expensive broker-assisted trade fee (~$35)
● Doesn't have forex trading options
4. Interactive Brokers
Interactive Brokers (IBKR) is one of the biggest multinational brokerage firms in the US. It's the ideal online trading solution for professional and active traders who frequently make use of tools and research.
IBKR focuses on services that offer flawless trade execution, broad market access, and low costs. It's among the only firms that allow individuals to trade stocks, bonds, funds, futures, forex, and options from a single account. Its asset classes extend to 135 markets across 33 countries and accept clients from over 220 countries.
Opening an IBKR account doesn't require any minimum fees. However, it charges a fee of $0.005 per share for Pro Platinum and a 1% share for trade value. IBKR Lite charges nothing.
Pros
● Offers fractional shares
● No minimum open deposit
● No maintenance fees
● No online stock trading commissions
● Global offerings and trade options
● Fantastic trading tools
● Fairly low margin interest rates
Cons
● Not as suitable for beginner investors as the other companies on this list
5. Ally Invest
Ally Invest offers several trading benefits, including commission-free stock and ETF trades, low contact fees, and forex trading.
Custodial clients get the same advantages as other Ally Invest customers, including mutual funds, closed-end funds, options, and more.
To add, the company doesn't ask for custodial account fees or minimum deposits. However, options security carries per-contract fees at the cost of $0.50.
If you don't have time to manage your investments, you can actually hire a robo-advisor for $100.
Pros
● Offers fractional shares
● No minimum open deposit
● No maintenance fees
● No online stock trading commissions
● Strong web-based platform
● Decent selection of research and tools
● Commission-free stock and ETF trades
Cons
● Oddly enough, it lacks proper 2-step authentication
6. Greenlight
The Greenlight Card is a prepaid debit card children can use.
Although the card technically belongs to your child, you have complete control of their spending and savings. The Greenlight application gives you real-time notifications every time your child spends money using the card.
Greenlight Invest, as the name suggests, allows you and your child to invest in stock with the help of the company's investing platform. Of course, only you can approve of every trade. Subscription fees range from $5 to $10 per month.
Pros
● Intuitive but easy-to-understand investing platform for kids
● Savings reward of up to 2% on balances over $5,000
● Cashback on debit card purchases
● Strict parental controls
Cons
● High fees
● Can't deposit physical cash
7. Loved Investing
Loved is a convenient investing platform that offers commission-free custodial accounts for anyone under the age of 18. You can start investing with as little as $5 and build a portfolio based on the thousands of companies, themes, and goals the company offers.
Compared to other investing platforms, Loved focuses on education and growth. The company not only offers investment tools but also educational resources for financial growth. It teaches both you and your child how to invest and save for his or her education and future.
Pros
● Offers fractional shares ( you can buy shares for as little as $1)
● Minimum deposit of only $5
● No maintenance fees
● Allows you to invest without commission
Cons
● Founded in 2017, which doesn't give it a long track record
● Isn't as in-depth as other investment platforms
8. Stockpile
Founded in 2010, Stockpile is an online digital brokerage that offers both custodial and brokerage accounts.
Thanks to its intuitive application, setting up a custodial account on Stockpile is as easy as can be. Simply download the application and select the "add account" option from the sidebar menu, where you'll see the option that says "custodial (adult)."
Fill in the required information and voilà! You're all set. Once the account is up and running, the beneficiary can check the account anytime to see how his or her stocks are doing by inputting their username and password into the app.
In terms of convenience, Stockpile reigns on top. Gift-giving is incredibly easy with its Stockpile electronic gift card, allowing you to transfer funds between $5 to $2,000. You can also choose a redeemable print-at-home gift card or mailed gift card.
If you're not a big fan of gift cards, you can instead buy stock using your debit or credit card. However, each transfer comes with a $3 fee.
Unlike other brokerage platforms, Stockpile charges you per trade. After paying the initial fee of $2.99, you'll only have to pay $0.99 for each additional stock.
Pros
● Over 1,000 stocks and ETFs to choose from
● Gift cards for stocks
● Easy account setup
● No minimum or annual fees
Cons
● You are charged per stock trade ($2.99 for initial trade and $0.99 for subsequent trades)
● Limited account selection; doesn't offer IRAs or joint accounts
● No real-time trading
● Available for US residents only
9. Stash
Stash makes investing straightforward and accessible through its personal finance app. Through its simplified platform, Stash is best suited for beginners looking to grow a large investment in the future.
Founded in 2015, Stash has upwards of five million users and $2.5 billion in assets in management. It has an account minimum of $0 and management fees of $1 to $9 per month, depending on the package you choose.
Investment expense ratios range from 0.16% to 0.25%. Although it doesn't have an annual or inactivity fee, it has a $75 outgoing transfer fee.
Compared to its competitors, Stash offers incredibly high fees. Even so, it offers a lot in exchange, including Stock-Back rewards programs, thematic and mission-driven directions, and automated features that invest in your behalf.
Pros
● Easy-to-use account
● Automatic investments
● Zero account minimum
Cons
● High subscription fees
10. Acorns
Acorns is a fairly new company, recently founded in 2014. Despite that, it has over 8 million customers and $3 billion assets under its belt.
Acorns specialize in robo-investing and micro-investing, both of which are lost-cost investing approaches that suit a ton of investors. It uses the power of algorithms and highly advanced software to build your ideal investment portfolio.
Acorn's robo-adviser charges a maximum fee of around 0.25% of your assets, which is significantly less than that of a human financial advisor.
If you'd rather manually choose your investments, Acorns may not be the right platform for you. It's best suited for hands-off investors who are interested in outsourcing portfolio management.
At a flat fee of $5 per month, custodial accounts in Acorn allow you to add multiple users at no added cost. Additionally, you can manually set up automatic recurring investments and take advantage of the dozens of educational resources found on the website.
Pros
● Offers a full financial wellness system
● Easy to set up custodial accounts
● No account minimum
Cons
● Management fees might be too costly for low-balance accounts
Information You Need to Open Custodial Brokerage Accounts
Opening a custodial brokerage account is very simple. The basic information you will need to open up such an account includes the following:
The contact information, birth date, and Social Security number of your child.
Your driver's license number (if you have one).
Your Social Security Number.
Your employer's name and address (if applicable).
Bank information so you can move money into the custodial brokerage account if necessary.
Final Thoughts
Custodial brokerage accounts are a great way to secure your children's financial future. The platforms listed above are brilliant investing options at affordable prices.
Most of these companies require a minimum deposit of $0 to $5 dollars and expense ratios of 0.50% or less for mutual funds. So, what are you waiting for? Open a custodial account for your child today!