It is often the case that there are options for actions that remain hidden to us until someone points them out.

Here is one such case. Note: All of this could be incorrect or illegal, and you should assume it is until and unless you speak with a professional or do the research yourself. Don't sue me.

Suppose you are in a situation where you have minor children and some spare cash and/or your minor children have some money. In many cases, parents and their kids use this type of money for immediate gratification--a phone, a trip, a car, entertainment, etc. It turns out that this money has a lot more future value than you might think based on the tax advantages of their present situation, where they earn a lot less money than required to support themselves. A single person can earn $16,550 per year without paying taxes (and much more--$48,350--in dividends on stocks held 3 months before payout).

Imagine a situation where your minor child has built up $10,000, $20,000, or even $40,000 (in today's dollars) in their brokerage account by the time they are 18. What a difference that will make to their chances of success in life.

It is fast and easy to open a custodial brokerage account for your children, especially if you already have one yourself. In fact, it may only take about two minutes and a few clicks.

Why would you do this?

1. There is no minimum age to set up a custodial brokerage account.
2. It is possible that the stock market will appreciate faster than inflation, particularly if you invest in an index fund.
3. In most cases, the amount will be small enough that you can simply invest in an index fund and forget about it until the child is ready to buy a car or turns 18.
4. In some cases, you or they will invest enough that you can leverage the laws to help you minimize your tax bills:
5. The child is only required to file taxes if they earn a profit of over $16,550 for the given year. To maximize growth while avoiding a tax bill later, you can sell off their positions up to this limit each year and re-invest the proceeds at the new basis.
6. In the event your kid builds up a purse large enough that this amount is exceeded, you could consider investing in something that pays dividends instead of growth stocks. Dividends on stock held more than 3 months are not taxable as long as your child collects less than $48,350 in a given year. This allows you to reinvest those dividends as long as this is true, building wealth much faster than you would if you had to pay income tax on that money.

Why would you not do this? The most obvious reason would be if you or they have no money, or the money is needed for other things. Additionally, the stock market carries risk, up to and including losing everything. Please use discretion in all things.