I have written a few articles on custodian accounts and I’m happy to share my actual experience with you. In this article, I’ll explain the journey I had with TD Ameritrade. I have two kids and have been wanting to set up savings for them. In my due diligence I encountered TD Ameritrade trading platform had no minimums and no monthly requirements on deposits. This was what made me decide to give it a try and open the accounts with them. I needed something with flexibility to put in as much or as little as I wanted, as a one time or recurring update to the account.

I opened the accounts with $25 required deposit and as my work got busier, I just left these accounts as is for a good two-year period. After a while I resurrected the logins, fully expecting the accounts to be closed, or penalized in some way, but to my surprise, I found them just as I left them. Not a single charge for a single fee, not one salesy phone call from TD Ameritrade, no pressure. Just my $25 sitting there, quiet and dependable.

Next thing I did was add more money to each account and start trading. Needless to say, subsequent years the nest egg for my kids has grown exponentially. Although most of the dramatic rise was during the first year of COVID when the stock market just offered fantastic discounts. If you are looking for a similar hassle-free experience, below I am summarizing main benefits in my humble opinion of having the custodial accounts with TD Ameritrade.

Main Benefits Of TD Ameritrade

  • No upsell calls whatsoever. Online trading at your own convenience. This is my favorite thing about TD Ameritrade serving as my online broker.
  • Easy to use trading platform. TD Ameritrade has been a great custodian since my first account. I’ve used them for over a decade and am happy to recommend them to all my friends. I have had great success with their trading software. I’ve been using them for about four years and have had very few problems. They have a very simple user interface, so they can help you get started even if you are new to stock trading. Analytics they provide as well as discovery tools for stocks make it a joy to do your own research. You can pick the investments you’d like to add to your child’s portfolio with just a few clicks. Of course, I do not recommend this for your kids’ accounts, but they even have access to a variety of instruments. Penny stocks, all index funds, currencies as well as your run of the mill stock discussed on CNBC, just to name a few. Picking your risk profile is easy. Do pay attention to trading fees though, as they tend to get higher for OTC penny stocks. Options trading is fun, but high risk, so even though it may be available as a service, futures trading is not recommended on custodial accounts. Charting could use some work, as intraday volatility is not easy to come to. You’d have to use their proprietary tool Thinkorswim. There is no additional charge for it though, and you can easily start to trade stocks in that environment.
  • Low trading fees. The fees for custodian accounts are the same as for regular brokerage accounts. You’ll pay the same commissions as you do with your regular brokerage account. For example, if you make a broker-assisted trade, you’ll pay $25, while online options trades cost 65C/contract. For bonds, you’ll pay a markup/markdown price for these trades. There are no annual or minimum deposit requirements. TD Ameritrade’s fee structure is competitive with that of most other brokerage firms.
  • Fantastic learning center. Custodian accounts with TD Ameritrade are one of the best types of accounts for beginners. This type of account will provide you with analyst research and recommendations, fundamental analysis, reports and press releases as well as technical analysis, if you are so inclined. Traded instruments can easily be added from the analysis window, mobile or desktop. Buy or sell signals and analyst recommendations can be helpful, and there are lots of stock screener tools available with TD Ameritrade, although I haven’t found the analyst recommendations to be quick enough, I still rely on fundamentals directly from company and technical analysis. But there is space for everyone, not just advanced trading activities.
  • Dependable, with no maintenance fees. You’ll never need to worry about your accounts being closed because you’ll be able to access them from anywhere. You can even set up a reminder to log into your account every year. Your custodian will know exactly where your money is. There are no minimums on the account either, other than opening up of the account which, at that time, was $25. Open an account and forget about it (like me) or become an active trader for your kids. Whatever liquidity you have decided to transfer into child savings, you can find good use for it with the rich commodity, ETF and equity product portfolio TD Ameritrade offers.
  • Tax benefits for your minor. Another important benefit of a custodian account in general is that it offers several tax benefits. An example of this is that it doesn’t require a tax return, which means that the account is less expensive. TD Ameritrade will print out all your IRS forms at the end of the year, much like your lending bank, and it’s easy to know what to submit because it doesn’t provide forms if they are not needed. As of today, I still haven’t had to report these accounts in any way during tax season which makes the profits your child’s trading account earns tax free.
  • Account is UGMA. Please note that the custodial brokerage accounts are set up as UGMA accounts, meaning they belong to my kids. This means I cannot withdraw money from them. Personally, I like this feature because it forces me into being disciplined about saving for the little ones. But if you think you may need to access the money in these accounts, you may need to look at other options.
  • Easy and convenient. Last thing I wanted to mention is that you can connect all your accounts and see your full portfolio in one screen. I have my own account as well as accounts for my kids, and all of them are available combined or separate in the app or on the website. Super helpful!

Thanks for reading, traders, I hope this helps you with your choices, if you are in search of custodial accounts. Warmly recommend TD Ameritrade, if you are looking to self-manage a brokerage account for your minors. To invest early is to invest wise, and at worst, there is always the index fund to the rescue if you are looking to forget about the account. There is no compulsion to be a day trader, or to invest in higher risk vehicles – forex and others that you would trade on margin.

Personally, I like developing my trading strategy ahead of time, testing it in my personal trading account, and if successful, moving my new trading options into the day-trading for the custodial accounts. While I don’t do a tone of these, on occasion, there is a nice little bonus in the equities. Perks of a self-directed trading account.

If you would like to read more about custodial accounts in general, please visit our Savings & Investing center.

5 thoughts on “Know your Choices: A Personal Story of Custodial Accounts”
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