Families may want to set up college savings or custodial accounts for young children, including a Roth IRA. Young investors may want to open a standard brokerage account, depositing some cash to get started buying index funds.
To open a brokerage account, you must be at least 18 years of age and have a social security number or tax ID. A standard brokerage account is a taxable investment account that will allow you to deposit and hold cash to buy various investments like stocks, bonds, money markets, mutual funds, index funds, or ETFs.
The traditional 401(K) is the best-known defined contribution plan for employees of private companies, offered by 67% of these firms. Most 401(k) plans provide at least three investment choices in your 401(k) plan, but some sponsor many more, like Vanguard, a popular choice.
Although you could set up a traditional IRA for your child, the contributions to a Roth IRA benefit from the likelihood that the child's earned income will have a relatively low tax rate when you contribute to their account.