Custodial Accounts with Vanguard
If you're seeking to save money to cover the expenses of a minor, whether for education or other needs, Vanguard has the ideal account for you.
Opening a Vanguard Custodial Account
To begin the application process, visit Vanguard.com and click on the "Open an Account" link at the top of the page. This will redirect you to a new page where you'll be asked whether you want to open a new account or transfer assets from an existing one. If you already possess a custodial account with another firm, it can be transferred to Vanguard. Otherwise, click the button to create a new account.
If you're opening a new account, you'll need to choose the funding method for your new account. Vanguard offers several options for this, including an electronic transfer of funds from an external bank account or a transfer from another Vanguard account. Additionally, you can fund the new account through a rollover from a previous employer's retirement plan or a transfer from another brokerage account, which follows a similar process to the account transfer mentioned earlier.
After completing the account funding stage, you'll need to select the type of account you wish to open. To choose the custodial account, click on the radio button next to the option for "College savings or investing for a minor."
Once you've made this selection, two new options will be presented: The Vanguard 529 Plan and the UGMA/UTMA (for a minor) account. Choose the second option, as it represents the custodial account. The specific type of account, whether UGMA or UTMA, will be determined by state law.
Legal Structure of the UGMA/UTMA Account
Contributions made to a UGMA or UTMA account do not qualify for tax deductions, but the earnings grow at the child's tax rate, which is usually lower than that of the parents, or at 0% in certain situations.
One downside of UGMA/UTMA accounts is that once the beneficiary reaches legal adulthood (usually between 18 and 25, depending on the state), the individuals who established the account, typically parents or grandparents, no longer have control over it. This is not the case with all minor brokerage accounts.
Custodial Account Fees at Vanguard
Vanguard applies a $20 annual fee to both UGMA and UTMA accounts. If the custodial account consists solely of mutual funds, the fee is assessed for each Vanguard mutual fund within the account. However, you can eliminate this fee by opting for electronic delivery of account documents.
Better Custodial Account
Charles Schwab, one of the market's largest and highest-rated brokerage firms, offers a superior custodial account.
They have $0 commission on stocks, ETFs, and over 4,200 mutual funds. There are no account fees.
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Open Schwab Account
Other Accounts at Vanguard for Minors
If the UGMA/UTMA account doesn’t appeal to you, Vanguard does offer a 529 plan, which could be a viable alternative, especially if you’re trying to save for education. While assets in a UGMA/UTMA account can be used for any purpose, assets in a 529 plan can only be used for educational expenses at a vocational or post-secondary school. And with the 529, parents can maintain control of the account permanently.
Like a custodial account, contributions to a 529 plan aren’t tax deductible at the federal level, but may be at the state level (depends on the state). Earnings grow tax free at the federal level and might at the state level.
Updated on 2/12/2026.
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