Starting a savings account for a child is a life changing event. Not only do they have an advantage using compound interest, but recent study from the University of Kansas found that kids that have savings and investment accounts had 20 times more money than kids that didn’t. Children with savings accounts/investment accounts were four times as likely to invest in stocks. The benefits of early savings gave those children a financial head start that was maintained through life. This generation of Americans will live well past the age of 100. Investing as little as a dollar a day can create wealth beyond most people belief.
The type of account depends on the outcome you want to produce. 529s are great for education to reduce the burden of student loans. UMGA or UTMA accounts have more flexibility in investment choices and transfers the assets to the child at majority. They are several low cost/low entry mutual funds that would serve as a great investment vehicle to get started. The Monetta Young Investor Fund offers an opportunity to dialog with a child overtime to help them understand the connection of ownership and economic returns.