10 Best Custodial Account Options for Your Child

Custodial accounts allow you to manage finances for a child or other minor. These types of accounts are usually set up by a parent, relative or guardian on behalf of a family member, although this is not necessary. Any adult can set up a custodial account on behalf of any child, such as a friend or even a stranger, unless otherwise restricted. These best custodial accounts can be an excellent vehicle for assets, such as college accounts, safety nets and trusts.

Once you set up a custodial account, a financial advisor can help you choose the right securities to match your beneficiary’s needs.

What Is a Custodial Account?

A custodial account is an account or investment portfolio that adults can establish on behalf of a legal minor, or someone under 18 years of age.

Technically, you can use any account as a custodial account by simply earmarking the money. A custodial account is something different from a mere earmark, though. It is a formal, legally protected account that keeps assets for the minor beneficiary. In many ways, it is similar to a trust in this regard.

There are two types of custodial accounts: UGMA (Uniform Gifts to Minors Act)and UTMA (Uniform Transfers to Minors Act) accounts. The most significant difference is that a UGMA account can only hold financial assets, such as cash, stocks and other securities. Meanwhile, a UTMA account can hold most assets of value, such as real estate and personal property.

Once a transfer has been completed to either a UGMA or UTMA account, it cannot be withdrawn without penalty. The adult who sets up the account is in charge of account management and investments, but, except for specific circumstances, they can only use the account’s assets for the benefit of the minor beneficiary. This is the main benefit of a custodial account, as well as the benefits that come from gift taxes.

If you are ready to open an account for your child, these are the best custodial accounts to consider.

Custodial Account Options

Many banks and investment firms offer custodial accounts. Finding one is, first and foremost, a decision of comfort level. Especially if the recipient child is young, you are going to have this relationship for a long time. Pick an institution you feel comfortable banking with for the foreseeable future. Beyond that, look for a firm that can offer the right balance of fees and guidance. Again, the longevity of this account is the key here.

On the one hand, this account may last a decade or more. High fees will have the time to seriously eat into this money. On the other hand, over time you will probably want guidance on how to invest for changing circumstances, maximize tax advantages and otherwise make the most of this (likely significant) portfolio.

Sound financial advice can pay for itself many times over. With these factors in mind, you can start looking at some excellent accounts, including but not limited to the following.

Data and Methodology

We identified the options below through exhaustive research and analysis of the of the custodial investment account market. They are listed in an order that’s in direct correlation with their individual composite score based on our methodology, which includes consumer ratings from multiple popular online app stores, and both the opening and ongoing costs to use each.

1. Fidelity

Fidelity stands out as one of the most popular custodial account providers, offering a mix of low fees, strong investment options and user-friendly tools. Parents or guardians can open a custodial account on behalf of a minor, then manage funds and direct investments until the child reaches the age of majority. Fidelity makes this process relatively straightforward, giving families flexibility while keeping costs low.

One of Fidelity’s biggest advantages is its wide-ranging selection of investments. Families can choose from commission-free mutual funds and ETFs, as well as stocks, bonds and other securities. This variety makes it easier to align the custodial account with your child’s long-term goals, whether it is preparing for college expenses or building wealth for adulthood.

Like other custodial accounts, a Fidelity account eventually transfers to the child when they reach the age of majority in their state. At that point, they gain full control of the money. While this can be a big responsibility for a young adult, Fidelity offers tools and advisory services to help them navigate financial choices, ensuring that the transition is as smooth as possible.

2. E*TRADE

E*TRADE offers a custodial account that allows parents and guardians to invest on behalf of a child with control until the child reaches adulthood. The platform is well-known for its easy-to-use interface, making it appealing for those who want to manage investments without a steep learning curve. Families seeking both flexibility and modern online tools may find E*TRADE a strong fit.

With an E*TRADE custodial account, you can choose from a wide selection of investments, including stocks, bonds, mutual funds and ETFs. The platform also provides access to professionally managed portfolios for those who prefer a more hands-off approach. This flexibility allows you to build a diversified portfolio that grows in line with your child’s future needs, whether that is higher education or simply a financial head start.

As with all custodial accounts, assets in an E*TRADE accounts eventually transfer to the child once they reach the age of majority. At that point, the child takes full control of the funds and any investment decisions. E*TRADE’s platform and educational resources can play an important role in preparing them for this responsibility, encouraging responsible financial habits at an early age.

3. Interactive Brokers

Interactive Brokers is often seen as a platform for experienced and active traders, but it also offers custodial accounts that can be a valuable tool for families looking to build wealth for their child. The account allows parents or guardians to invest on the child’s behalf until they reach the age of majority, at which point control transfers to the young adult. While its platform may feel complex to beginners, Interactive Brokers stands out for its advanced capabilities and global reach.

One of Interactive Brokers’ biggest strengths is its unparalleled access to global markets. Through a custodial account, you can invest in stocks, bonds, mutual funds, ETFs and even international securities. This breadth of options makes it possible to create a highly diversified portfolio and potentially expose your child’s account to opportunities beyond U.S. markets, something that few custodial account providers offer at this scale.

Interactive Brokers is particularly appealing for families who plan to trade frequently. Its low trading fees and tiered pricing structure can help keep costs manageable, especially compared with platforms that charge higher commissions. For custodial accounts that involve frequent adjustments or sophisticated investment approaches, these cost savings can add up over time.

4. Ally

Ally makes opening and managing a custodial account straightforward, which can be a big advantage for families just starting out. Parents or guardians maintain control of the account until the child reaches the age of majority, giving them the ability to invest on the child’s behalf while keeping the process streamlined. Ally’s digital-first approach also means you can manage the account entirely online, without needing to visit a physical branch.

What sets Ally apart is its ability to combine banking and investing in one place. A custodial account with Ally Invest offers access to stocks, ETFs, options and mutual funds, while Ally Bank provides high-yield savings accounts. This flexibility makes it easy to balance growth-oriented investments with safe, interest-bearing savings, so you can tailor the account to your child’s future financial needs.

Ally has built a reputation for affordability, and its custodial accounts reflect that. There are no account minimums to get started, and stock and ETF trades are commission-free. For families who want to maximize growth potential without paying high fees, this structure can make Ally a cost-effective choice.

5. Vanguard

Vanguard is one of the most respected names in the investment world, and its custodial accounts carry that same reputation for reliability. Parents or guardians can open an account for a child and manage it until the child reaches the age of majority. For families seeking a long-term, steady approach to investing, Vanguard’s custodial accounts are often a top choice.

Vanguard is best known for its low-cost index funds and ETFs, which form the core of many retirement and college savings strategies. With a custodial account, you can tap into these same investment options to build a well-diversified portfolio for your child. The low fees are particularly valuable over time, since they allow more of the account’s growth to remain invested. When your child reaches the age of majority, they gain full ownership of the account.

While this is a major responsibility, Vanguard provides educational materials and access to advisory services to help them make thoughtful financial decisions. The firm’s long-term perspective can give young adults a strong foundation as they begin managing their own finances.

6. Merrill Edge

Merrill Edge is a strong option for families who want their custodial account connected to a major financial institution. As part of Bank of America, it allows parents or guardians to open and manage investments on behalf of a child until they reach the age of majority. For households already banking with Bank of America, the ability to see banking and investing accounts in one place can make Merrill Edge especially convenient.

A Merrill Edge custodial account provides access to a broad range of investments, including stocks, ETFs, mutual funds and bonds. The platform also offers professionally managed portfolios for those who prefer a guided approach. This variety enables you to tailor the account to your child’s future needs, whether you want to prioritize growth, stability or a mix of both.

As with all custodial accounts, ownership of a Merrill Edge account transfers to the child once they reach the age of majority. Merrill Edge’s advisory services and digital tools can help prepare them for this responsibility, offering support as they make their first independent financial decisions. This guidance can ease the transition and promote responsible money management.

7. Schwab

In addition to finding the best custodial account, custodians must consider what will happen when the child takes control of the account. Ideally, the child will not simply empty the account but will instead continue to maximize the value of this investment through ongoing management. This is where Charles Schwab comes in particularly handy.

Schwab offers outstanding, low-fee investment options while you manage this account during your child’s minor years. Once they turn 18, the firm provides a wealth of financial advising services to help them understand the responsibilities and opportunities that come with that kind of money. A custodial account with Charles Schwab offers you great tools for investment. It offers your beneficiary the same advantage.

8. Stash

Stash is designed to make investing approachable, and its custodial accounts follow that same philosophy. Parents or guardians can open and manage an account for their child until they reach the age of majority, giving families an easy way to start building wealth early. The platform’s mobile-first experience is particularly appealing for those who want to manage everything from their phone with minimal complexity.

One of Stash’s biggest advantages is the ability to purchase fractional shares of stocks and ETFs. This feature allows families to invest in well-known companies and diversified funds without needing a large upfront commitment. For custodial accounts, this makes it simple to build a portfolio gradually, even with modest contributions.

Like all custodial accounts, a Stash account shifts to the child once they reach the age of majority. By that point, the child will have access to not only the funds but also the platform’s educational resources to guide their decision-making. This can help ensure that the transition feels empowering rather than overwhelming.

9. Acorns

Acorns has a very clever business model. This is a robo-advisory, meaning that it manages your money for you based on your chosen preferences. While you can invest money directly, it also allows you to integrate their system into your banking and daily spending. Whenever you make a transaction, Acorns will round it up to the nearest dollar. The difference is then shuffled off into your Acorns portfolio to be invested and managed by their algorithms.

This involves investing in increments of 5 cents, 14 cents, 67 cents and more at a time. While it does not add up to much right away, it could earn quite a bit if you open a custodial account when your child is an infant. That is more than enough time, as the company explains, for an acorn to grow into a tree.

10. Bank of America

Bank of America is a runner-up for custodial banking. There are no monthly maintenance fees until the age of 25, with no overdraft fees.

Bank of America’s strength is its institutional size and easy access. You do not know where your child will be in 18 years, nor what their specific financial needs will be. By setting up a custodial account with Bank of America, you can help ensure that your child will have both financial access and advice once they take control of their money.

Bottom Line

Custodial accounts are a good tool for passing wealth on to a child. While there are better vehicles for specific goals like college tuition, a UGMA or a UTMA account can keep assets safe until your child reaches the age of majority. This gives your child time to grow in this unique situation so they are taken care of financially while getting the chance to learn strong financial management skills.

Investing Tips

18 years old is very young to come into the kind of money a custodial account usually holds, which is why you may want to consider a custodial account. A financial advisor can provide the best possible guidance based on their knowledge and experience. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you want to figure out how much return you could earn with a certain mix of assets, consider using our asset allocation calculator.