how to make an investment account

Setting up a custodial trading account is a great way to start investing if you’re a minor. Here’s a step-by-step guide to help you through the process:

1. Choose a Brokerage

First, decide which brokerage firm you want to use. Some popular options include Charles Schwab, Fidelity, and TD Ameritrade. Look for one that specifically offers custodial accounts and has zero or low fees, good customer service, and educational resources. Certain brokerages even offer a low return on uninvested cash, sometimes up to 5% yearly. If you are limited in the amount you can invest, try to find brokerages which offer fractional shares which will allow you more flexibility in your investments.

2. Gather Required Information

You’ll need the following information to open the account:

Your Parents Information: Name, address, Social Security number, and other personal details.

Your Information: Name, address, Social Security number, and date of birth.

3. Open the Account

Go to the brokerage’s website and find the option to open a new account. Select the custodial account option (often listed as UGMA/UTMA account). Fill out the online application with the required information. You will need your parents for this part.

4. Fund the Account

Once the account is set up, you’ll need to transfer money into it. This can usually be done via bank transfer. Some brokerages may have a minimum deposit requirement, so check their policies.

5. Choose Investments

Decide how you want to invest the money. You can buy stocks, bonds, mutual funds, ETFs, and other securities. Many brokerages offer tools and resources to help you choose investments. Read on our next blog post what these different kinds of investments are and what’s right for you.

6. Manage the Account

Your parent is the custodian, so they will manage the account until you reach the age of majority (18 in Texas). This means while you’re making investment decisions and monitoring the account’s performance, they are the ones actually inputting orders and managing the account.

7. Educate Yourself

Use this opportunity to learn about investing and financial literacy. Use this to keep up with current markets, and be able to be your own part-owner in a corporation!

Extra Tips

Tax Implications: Be aware of the tax implications of custodial accounts. The first $2,600 of a child’s unearned income is tax-free, but amounts over that may be taxed at the parent’s rate.

No Contribution Limits: There are no limits on how much you can contribute to a custodial account, making it a flexible option for saving.

Conclusion:

Setting up a custodial trading account can be a rewarding way to learn valuable financial skills. It is your first step in attaining applied investment knowledge, and it’s a great first step to allow you to visualize return.