Custodial Account

• Individuals under 18 cannot invest by themselves; a parent or legal guardian must open a custodial account for the young investor. A custodial account bears the name of the child, with a parent or guardian as well. When the child turns 18, the account and its contents become part of the child's assets, and he can invest his money as he pleases. Until his 18th birthday, however, he can deposit his own money and make his own decisions about the account, but the parent or guardian must authorize any account activity.
  
  

Funds for Young People

• Kiplinger reports that a handful of mutual funds aimed at young investors popped up before the dot com crash in the late 1990s. However, since their inception, the funds did poorly and had all but disappeared by the 2008 financial crisis. A few funds targeted at young people remain in business, namely the Monetta Young Investor Fund, but Kiplinger, The Motley Fool and Morningstar recommend that parents and young people look at and compare a range of solid mutual funds instead of choosing from the small offering of funds targeting youth.
  
  

Morningstar Recommendations

• Morningstar, the premier mutual fund ranking and analysis service, recommends that investors start young --- preferably before 18. In an article on MSN Money, Morningstar writers recommend a few funds but emphasize that looking for solid basics matters more than anything else. Morningstar advises looking for a fund that invests primarily in stocks, especially those with large market caps (also known as blue chips --- large, well-known companies with a solid track record) and is easy to use. Furthermore, the service recommends funds that have low costs and fees, and a low initial minimum investment.
  
  

Motley Fool Recommendations

• The Motley Fool gave the Monetta Young Investor Fund a lukewarm review and recommended that young investors or their parents opt for an index fund instead. Index funds are mutual funds that follow the stock market by maintaining a portfolio of stock from across the market and often mimicking the holdings of the Standard and Poor 500 or the Dow Jones Industrial Average. Index funds have lower costs and often higher returns than most mutual funds and give investors an introduction to the stock market.