Childhood Investing

Childhood Investing

Tyler Phillips, Writer

I am not trying to sound like Elon Musk, but the best thing for investing is a long-time span. Children are the best for a long time investing. They are not the legal age to do it on their own, but with a legal guardian they can start a brokerage account, it all depends on the tax income. If the child does not have tax income, you can open an account under the U.G.M.A./U.T.M.A. (Uniform Gifted to Minors Act or Uniform Transfers to Minors Acts); the legal guardian can open a custodial brokerage account for the child. The account will initially be in the name of the legal guardian’s name, but when the child becomes 18-21 years old, they will have full control over the brokerage account. The other option for investing for minors is if the child has taxable income or wages. If the child has earned income, the legal guardian can help open a custom I.R.A. (Individual Retirement Account), A Roth I.R.A. is more popular with the younger generation. The money put in the child’s account will grow tax-free. The money put in can be pulled out at any time. This money can be used for future expenses.

Investing definition- Buying shares of a company, hoping for it to go up.

There are 2 main steps to investing:

  1. Helping the child pick one or more individual stocks, (the more stocks the more money, who can say no to more money): help the child invest in familiar household items, it will get them excited for investing.
  2. Build the rest of the account with index funds. Get them in the habit of checking the investment and adding money every month. As they add more money to the account, it is recommended to start stripping away additional shares of stocks and instead focusing on cost index funds. These types of funds are needed to diversify the account, by pooling lots of stocks into one investment.

There are lots of investment apps that are more popular towards the younger generation, like Robinhood and Webull, those apps do not offer custodial accounts. The research will need to be done on investment apps and their investment. Investment apps will need thought and decision with the teen, to see if they want to invest before the legal age.