Using Custodial Accounts
A stock portfolio...for my five-year-old?
In fact, if a ShareBuilder Account makes sense for you, it may make even more sense for your five-year-old or half-day-old. The younger you are, the longer you'll be around to watch the magic of compounding (fixed or variable) at work. The younger you are, the more expensive it will be to go to college, travel the world, and retire in comfort when you get around to those nice things. Whatever your age, if you have long-term goals, then investing in the stock market can be a great way to start.
Traditional brokerage accounts typically have high minimums for investing - and they force you to buy "whole shares." A ShareBuilder Custodial Account is different: it has no account or investment minimums, and costs $4 per automatic investment. (For more information, see our Pricing & Rates.)
Any adult can open a custodial account for a child or grandchild. All you need is the child's name, address, and social security number. Once the account is open, you can deposit money into the child's account; however, until the child is legally an adult, only the custodian can access the account and make investment decisions. Neither the child nor any other person can change the investments or remove cash, though anyone with the account number can add cash to the account.
ShareBuilder Custodial Accounts, just like regular ShareBuilder Accounts, are set up for "dollar-based" investing. You simply invest the amount you can afford, you decide which stocks to own, and we do the buying automatically on a recurring basis. Your portfolio grows bit by bit - and you determine the size of the bits. When the child reaches the age of distribution, the accumulated stocks and cash become the property of one very grateful young adult.
You (as the custodian) may be able to remove money from the account for expenditures in the interests of the child, for example to pay educational expenses. But you cannot use the account for your own purposes, or for any purpose not sanctioned by state law.
Opening a ShareBuilder Custodial Account is easy, and you can directly gift either cash or existing stock to the account. Better yet, the wealth-building potential of regular investing can be rewarding. Look at this example. Suppose you invest $100 for a child today, and put an additional $50 each month into the account. Now assume that the stock market return averages 10% each year (of which there's absolutely no guarantee). This bar chart shows how much you invested, and how much that investment is worth, after 10, 15 and 20 years. *
Little boys and girls think they're going to be young forever. You know better - so make sure they are financially prepared for life after childhood.