Are you thinking about teaching your child what investing is? Well, if you are, it is a good idea to purchase some stock for your child. Minors cannot purchase stocks. So, as a parent, you should do it for them. You are given two options.
- A Guardian Account – you have ownership of the child’s account, and the gains will be taxed in your rate.
- A Custodial Account – your kid, owns the account even if you are the one who controls the account. The gains are taxed at your child’s tax rate. When your child reaches a certain age, he will be in control of the account.
You are given the ability to choose which one you are most comfortable for you and your child. If you go for the custodial account, keep in mind that you should understand what restrictions are there when it comes to having control of the money that your child has until she knows how to run an account.
After choosing which one of the two your more comfortable in, we have the investment account set up. Then know what the minimum requirements that the account has, also know other information and even documentation that you will possibly need to be able to open the account for your child.