Custodial Accounts with Vanguard
If you want to save money for a minor’s expenses, whether for education or other needs, Vanguard offers an account option for you.
Opening a Vanguard Custodial Account
To start the application, go to Vanguard.com and click the "Open an Account" link at the top. You’ll be asked if you want to open a new account or transfer assets from another one. If you already have a custodial account at a different firm, you can move it to Vanguard. Otherwise, click to create a new account.
For new accounts, you’ll need to choose how to fund it. Vanguard allows funding by electronic transfer from a bank, from another Vanguard account, through a rollover from an old employer retirement plan, or by transferring from another broker.
After funding, you’ll choose the account type. To select a custodial account, click the radio button for "College savings or investing for a minor."
From there, you’ll see two options: the Vanguard 529 Plan and the UGMA/UTMA account. Choose the UGMA/UTMA account if you want a custodial account. State law decides whether the account is UGMA or UTMA.
Legal Structure of the UGMA/UTMA Account
Contributions to a UGMA or UTMA account are not tax deductible, but earnings are taxed at the child’s tax rate, which is usually lower than the parents’, or sometimes 0%.
A drawback is that once the child reaches adulthood (between 18 and 25 depending on the state), the parents or grandparents lose control of the account. This is not true for all types of minor accounts.
Custodial Account Fees at Vanguard
Vanguard charges a $20 annual fee for UGMA and UTMA accounts. If the account only has Vanguard mutual funds, the fee applies to each fund in the account. You can avoid the fee by choosing electronic delivery of account documents.
Better Custodial Account
Charles Schwab, one of the largest and most trusted brokerage firms, offers a stronger custodial account. Schwab charges $0 commissions on stocks, ETFs, and more than 4,200 mutual funds. There are no account fees. Schwab also has more commission-free mutual funds than Vanguard and better trading and research tools.
Learn more...
Free Charles Schwab Account
Open Schwab Account
Other Accounts at Vanguard for Minors
If the UGMA/UTMA account doesn’t work for you, Vanguard also has a 529 plan, which is good for saving for education. While UGMA/UTMA assets can be used for anything, 529 plan assets must go toward education at a vocational or higher-education school. With a 529 plan, parents keep control of the account permanently.
Like custodial accounts, contributions to a 529 plan are not tax deductible at the federal level, but they may be at the state level, depending on the state. Earnings grow tax free federally and sometimes at the state level too.
Updated on 9/22/2025.
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