Motley Fool Money — “Investment Accounts for Kids”
Host: Robert Brokamp
Date: February 21, 2026
Episode Overview
This episode of Motley Fool Money, hosted by Robert Brokamp, focuses on helping parents, grandparents, and other adults choose the best investment accounts for the children in their lives. Brokamp lays out the pros and cons of the five most common types of investment accounts for kids: custodial accounts, brokerage accounts owned by adults, the new Trump accounts, Roth IRAs, and 529 college savings plans. He also provides context on recent market performance and inflation trends, sharing a long-term perspective on the importance of early financial education.
Key Discussion Points and Insights
1. International Stock Market Update
Timestamps: 00:12–02:55
- 2025 saw international stocks return 32%, outperforming the S&P 500's 18% and marking the largest outperformance margin since 1993.
- "International stocks are off to a stellar start. Last year, international stocks returned 32%, their best year since 2009." — Robert Brokamp (00:12)
- The trend continues in early 2026: international stocks up 9% vs. S&P 500's 0.6%.
- Main drivers: A 10% drop in the US dollar (since the start of 2025) and international stocks remaining cheaper than US counterparts.
- Forward PE of S&P 500 still higher than MSCI World EX US index.
2. Inflation and Power Prices
Timestamps: 02:55–03:31
- January inflation fell to 2.4%, but electricity costs rose nearly 7% in 2025.
- "US families shouldn't expect any near-term relief [on electricity], thanks to AI data centers rapidly boosting demand while power supply expands slowly." — Robert Brokamp (03:11)
- The competition between tech firms and homebuilders for land and resources exacerbates housing shortages and price increases.
3. Market Risk & History
Timestamps: 03:21–03:31
- "The number of the week, 5.2 years. That is how often, on average, the US stock market drops 20% or more; 30% or more every 8.9 years." — Robert Brokamp (03:21)
- Three conditions that increase likelihood of a stock market drawdown: low volatility, extreme inflation, and expensive valuations. The current market meets two of the three.
Main Segment: The Five Most Common Investment Accounts for Kids
Timestamps: 04:33–19:21
Introduction to the Accounts
- "One of the most powerful gifts you can give a child is a head start on building wealth." — Robert Brokamp (04:35)
- The five accounts covered:
- Custodial accounts (UGMA/UTMA)
- Brokerage accounts owned by adults
- Trump accounts (new, aka 503 accounts)
- Roth IRAs
- 529 college savings plans
1. Custodial Accounts (UGMA/UTMA)
Timestamps: 05:00–08:00
Pros:
- Investment flexibility: "You can pretty much buy whatever you want." (05:23)
- UTMAs allow wider range, including real estate and alternatives.
- Tax advantages for unearned income (so-called “kiddie tax”):
- First $1,350 unearned income is tax-free; next $1,350 taxed at child's rate.
- No contribution limits.
Cons:
- Irrevocable gift: Money must be used for the child’s benefit.
- Loss of control when child becomes adult (age 18–25, varies by state).
- Can significantly reduce financial aid eligibility as custodial accounts are considered the student’s asset.
2. Brokerage Accounts Owned by Adults
Timestamps: 08:00–09:15
Pros:
- Adult retains full control over the funds and transfer timing.
- Lower and sometimes no impact on the child’s financial aid eligibility.
- No contribution limits, similar to custodial.
Cons:
- Tax liability: "You own the account, so you're going to owe all the taxes." (08:43)
- No tax benefits specific to kids.
- Needs to be factored into your estate plan.
3. Trump Accounts (New 503 Accounts)
Timestamps: 09:15–12:40
Background:
- Created by new legislation ("one big beautiful bill"). Available to those under 18.
- "Accounts could be opened now by filing Form 4547 with a 2025 tax return or at TrumpAccounts.gov." (09:55)
- Accounts can't be funded until July 5, 2026.
Pros:
- Tax-deferred growth; contributions not taxed when distributed, earnings taxed as ordinary income.
- US citizens born 2025–2028 get $1,000 from US Treasury.
Cons:
- Limited investment menu (only low-cost index funds).
- Annual contribution limit: $5,000 per year per child.
- Not tax-deductible contributions.
- Penalties on non-qualified withdrawals (10% on pre-59.5).
- Irrevocable; lose control at 18.
- Unclear details regarding financial aid impact.
4. Roth IRAs for Kids
Timestamps: 12:40–15:30
Pros:
- Decades of tax-free growth: "The IRA started in childhood could grow for 50+ years." (12:47)
- Qualified withdrawals of contributions (not earnings) at any time, tax and penalty-free.
- Minimal impact on financial aid.
Cons:
- Child must have earned income; contributions capped at what they earn.
- Maximum annual contribution ($7,500 in 2026).
- Early withdrawal penalties on earnings.
- Irrevocable and control passes at adulthood.
5. 529 College Savings Plans
Timestamps: 15:30–18:45
Pros:
- Tax-free growth for qualifying educational expenses (room, board, books, even some test fees).
- Favorable financial aid treatment—ownership by adults reduces aid impact.
- High lifetime contribution limits (up to $500,000+ depending on state).
- Account owner controls funds, can change beneficiary.
- More than 30 states offer state income tax deduction.
- New: Ability to transfer unused balance to a Roth IRA (with restrictions).
Cons:
- Limited investment options (menu of state-selected mutual funds/ETFs; individual stocks not permitted).
- Penalties for non-qualified withdrawals (tax + 10% penalty on earnings).
- Possible recapture of state deductions if funds not used for college or moved to another state.
- "It's not very fun for the kid to see the account grow and then have it used for college!" — Robert Brokamp (18:32)
Choosing the Best Account
Timestamps: 18:45–19:21
- "Which one should you choose? Well, that of course depends on your situation and preferences. But the good news is you don't have to choose just one." — Robert Brokamp (18:45)
- Brokamp shares his family’s approach:
- Opened 529s soon after birth and used age-based portfolios.
- Opened custodial accounts so kids could participate in investment choices.
- Started Roth IRAs when kids began earning, invested in index funds and individual stocks.
- Emphasizes combining education with gifting financial tools to boost engagement and financial literacy.
Notable Quotes & Memorable Moments
- "When you're competing with Amazon, they’re going to put more wire in one building than in all the houses I’ve ever built in my lifetime." — Neil Cobel (Home Builder, quoted by Robert Brokamp, 02:48)
- "One of the most powerful gifts you can give a child is a head start on building wealth." — Robert Brokamp (04:35)
- "It's not very fun for the kid to see the account grow and then have it used for college!" — Robert Brokamp (18:32)
- “There is a lot more to learn about each of these accounts, so do additional research and perhaps speak to a financial or tax professional.” — Robert Brokamp (19:15)
Additional Nugget: Estate Planning for Pets
Timestamps: 20:18–End
- “Why Fido Should Be In Your Estate Plan”—recommendations to name a backup caretaker and possibly set up a pet trust.
- Diane Keaton reportedly left $5 million to her Golden Retriever via a pet trust.
Conclusion
Robert Brokamp provides a thorough, practical guide to the most common investment accounts aimed at building long-term wealth for kids. He emphasizes the blend of account benefits, potential pitfalls, and how different combinations can work best based on family circumstances. His own experience illustrates the real-life benefits of engaging children in investing and personal finance early, while encouraging listeners to dig deeper or consult professionals before acting.
For deeper dives:
- savingforcollege.com for 529 specifics and updates
- trumpaccounts.gov for Trump account info as the program evolves
- Consult a trusted tax or financial advisor for personal circumstances
Motley Fool’s advisory note: Do your own research and don’t invest based solely on podcast recommendations.