Kids investment accounts

Investing shouldn’t only be done by, or for, adults. Kids can benefit from investing, too — and getting them interested in it while they’re young can pay off handsomely by starting them on the road to financial security. After all, kids have decades in which to invest, and small sums can grow powerfully over long periods, helping pay for educational expenses and more.

At a minimum, learn more about 529 plans, which are designed to let you, and others, contribute to a tax-advantaged account to be used for someone’s educational expenses. (There are no annual contribution limits, but contributions exceeding IRS per-person gift limits will be taxed.) Each state has a plan, some better than others, and you can use any state’s plan. Learn more at Savingforcollege.com.

Coverdell ESAS (Education Savings Accounts) are another option; they’re similar to 529 plans, but are offered by brokerages. Contributions are limited to $2,000 per year, but you can invest in just about any stock, ETF or mutual fund.

While minors can’t open brokerage accounts on their own, they can do so with your help. You can open an account in their name, and you can park dollars to invest in it, too. There are custodial versions of regular, taxable brokerage accounts, and there are also custodial IRAS that kids with earned income (not allowance or gift money) can save money in. Note that while IRAS are retirement savings accounts, young people are allowed to withdraw money for qualified college expenses without penalty.

There are more details about each kind of plan, so read up on them. Try to involve the kids in your life in your investing — and theirs. Pick promising companies in which they’re interested, such as Starbucks, Netflix, Apple or Nike. Discuss business stories in the news. Kids can also learn more about investing with “The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of” by David and Tom Gardner with Selena Maranjian (Touchstone, $17).