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How to Open an Investment Account for a Child in 2026: Custodial UTMA vs 529 vs Trump Account vs Custodial Roth (and In-Trust Accounts in Canada)

First, decide what the money is for

The right account depends on what the money is for. Here's the short version:

Many families use two: a tax-advantaged account for school, plus a flexible one.

US option 1: custodial UTMA/UGMA account

A custodial account is a regular brokerage account in a child's name, managed by an adult (the custodian) until the child comes of age. UTMA and UGMA are the two state laws that govern them. They work almost the same way.

How it works:

• Any amount, any investment. No contribution limit. You can buy stocks, ETFs and funds.
• The money belongs to the child. Gifts are irrevocable. You can't take them back.
• The custodian controls it until the age of majority, usually 18 to 21 depending on the state, after which the child takes over and can spend it on anything.
• Spending must benefit the child while you're custodian.

Taxes: the kiddie tax. For 2026, a child's investment income is taxed like this:

Source: IRS Topic 553. Earned income from a job is never subject to the kiddie tax.

Gift limits: you can give up to $19,000 per child in 2026 ($38,000 for a married couple) without filing a gift tax return.

The catches:

1. The child gets control at 18 to 21, whatever their plans.
2. Financial aid: custodial accounts count as the student's asset on the FAFSA, assessed at up to 20%, versus about 5.64% for parent assets.

Best for: flexible savings that could go toward a car, a first apartment or a business, when you're comfortable handing over control.

US option 2: 529 plan

A 529 plan is built for education. Growth is tax-free if used for qualified education costs, including college, up to $10,000 a year of K-12 tuition and some apprenticeships. Many states also give a state tax deduction.

• Owned by the parent, so it's friendlier for financial aid.
• The parent keeps control, even after the child turns 18.
• Unused money can be moved to a sibling, or, within limits, rolled into the child's Roth IRA.

Best for: college savings. Full guide: how to open a 529 plan.

US option 3: Trump Account (new in 2026)

Trump Accounts launched on July 4, 2026:

• US-citizen children born January 1, 2025 to December 31, 2028 get a $1,000 Treasury deposit. You must claim it with IRS Form 4547 or at trumpaccounts.gov.
• Family can add up to $5,000 a year, including up to $2,500 from an employer.
• Money goes into low-cost US stock index funds and can't be withdrawn before 18.

Best for: every eligible baby, if only for the free $1,000. Step by step: how to open a Trump Account.

US option 4: custodial Roth IRA

If your child earns money from a job, babysitting or a small business, a custodial Roth IRA is the most powerful account available:

• Contributions up to the child's earned income for the year, or $7,500 in 2026, whichever is lower.
• Growth and retirement withdrawals are tax-free.
• A parent can fund it as a gift, as long as the child earned at least that much.

$2,000 invested at 15 could grow to almost $59,000 by age 65 at a 7% average return, all tax-free. Keep records of the child's earnings. Learn more: how to open a Roth IRA.

Canada option 1: RESP

The Registered Education Savings Plan is the best place to start in Canada because the government adds money:

• The Canada Education Savings Grant adds 20% of the first $2,500 you contribute each year, so $500 a year, up to $7,200 per child.
• Lower-income families can qualify for the Canada Learning Bond with no contribution required.
• Growth is tax-sheltered, and withdrawals for school are taxed in the student's hands, usually at a low rate.

Full guide: how to open an RESP.

Canada option 2: in-trust account

An informal in-trust account is a brokerage account opened "in trust for" a child. It works like a US custodial account, with Canadian tax rules:

• Interest and dividends on money you gave are generally taxed in your hands under CRA attribution rules.
• Capital gains are generally taxed in the child's hands, often at little or no tax.
• That's why many parents hold growth-focused ETFs that pay small dividends.
• Ownership questions at 18 can be complicated. Speak to a tax professional for larger amounts.

At 18, your child can open their own TFSA. See what a TFSA is.

Side-by-side comparison

Where to open a custodial account

Most major brokers offer custodial accounts with $0 commissions and no minimums:

• Fidelity: Youth Account for teens 13 to 17 plus standard custodial accounts.
• Charles Schwab: custodial accounts with Schwab's education tools.
• Vanguard: good for index-fund-only custodial portfolios.
• In Canada: Wealthsimple, Questrade and most bank brokers offer RESPs; in-trust accounts are available at many brokers, sometimes by phone.

Compare them in our best brokers for beginners and in Canada.

How to open a custodial account in 5 steps

1. Choose a broker and select "custodial" (or UTMA/UGMA) as the account type.
2. Enter your details as custodian, and the child's name, date of birth and Social Security number.
3. Link your bank account and make the first deposit.
4. Choose investments. For most kids, one low-cost total-market or S&P 500 index fund is plenty. Time is on their side.
5. Set up automatic monthly contributions, and invite grandparents to gift into it on birthdays.

What to invest in

A child has decades ahead, so most of the money can go into stocks:

• One broad index fund, such as a total-market or S&P 500 fund. See how to pick an ETF.
• Or a target-date fund set to the year the child turns 18, if it's for college.
• If your teen wants to learn, let them research a few companies with a small slice, using our 7-step stock-picking checklist.

The bottom line

For college, start with a 529 or RESP. For eligible US babies, claim the Trump Account $1,000. If your teen has a job, open a custodial Roth IRA. For flexible money, use a custodial UTMA/UGMA or an in-trust account, knowing the child gets control as a young adult. The best time to start is the year they're born. The second best is today.

Frequently asked questions