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As a mom of three, I spend a lot of time thinking about the future. Not just the big milestones—college, careers, and adulthood—but also the small choices we make today that can quietly shape our kids’ lives later on. One of those choices is whether to start investing on their behalf.

The truth is, time is one of the greatest financial advantages our kids will ever have. When money is invested early, it has years—sometimes decades—to grow through compound interest. Even modest contributions during childhood or the teen years can grow into something significant over time. Beyond the financial benefit, opening an investment account for a child can also be a powerful way to teach them about stewardship, responsibility, and long-term thinking.

Two of the most common investment accounts for kids that parents explore are Custodial Roth IRAs and UGMA accounts. Both allow parents to invest for their children, but they serve slightly different purposes.

What Is a Custodial Roth IRA?

A Custodial Roth IRA is a retirement account for a minor that a parent manages until the child reaches adulthood. The key requirement is that your child must have earned income—things like babysitting, yard work, or a part-time job.

The money is contributed after taxes, and the major benefit is that the investments grow tax-free for retirement. Because children have such a long time horizon, this can be incredibly powerful. A few early contributions can grow for decades.

You can learn more about how these accounts work here:
https://www.fidelity.com/learning-center/personal-finance/retirement/custodial-roth-ira

What Is a UGMA Account?

A UGMA (Uniform Gifts to Minors Act) account is another type of custodial investment account. Unlike a Roth IRA, your child does not need earned income to contribute. Parents, grandparents, or relatives can add money and invest it in things like stocks, mutual funds, or ETFs.

These accounts offer a lot of flexibility, but investment earnings may be taxed each year under special “kiddie tax” rules. When your child reaches adulthood (usually between 18–21 depending on the state), the account legally becomes theirs, and they can use the funds however they choose.

Here’s a helpful overview of how custodial investment accounts work:
https://www.investopedia.com/terms/u/ugma.asp

The Biggest Differences

The simplest way to think about the two options is this:

• Custodial Roth IRA: Ideal for long-term retirement savings and tax-free growth

• UGMA Account: Ideal for flexibility, allowing funds to be used for education, a car, a first apartment, or anything else

If you'd like to compare them in more detail, this guide explains the differences well:
https://www.nerdwallet.com/article/investing/custodial-account

A Final Thought for Parents

As parents, we invest so much of ourselves into our kids—their faith, their character, their education, and their dreams. Thinking about their financial future is simply another way to care for them long-term.

Even small investments made early can grow into meaningful opportunities later in life.

If you’ve never explored investment accounts for your kids, consider taking a little time this week to research your options or speak with a financial advisor. A simple step today could become one of the greatest financial gifts you give your children tomorrow.