What a Secret Childhood Stock Account Taught About Kid Investing

Last week, my fiance got a text from his parents asking for his Social Security number. It wasn't a scam. His grandparents had opened an investment account for him when he was born, filled with Coca-Cola stock. He turned 30 this year. His parents had simply forgotten about it.

The account was a custodial UGMA, legally his since age 18. The discovery set off a flurry of calculations: capital gains tax if he sold to fund our wedding, the cost basis, the holding period. It also raised a question for millions of families now opening Trump Accounts under last year's One Big Beautiful Bill Act.

Those accounts, named after the president who signed the bill, let adults contribute up to $5,000 per child per year. The money goes into a vehicle that works like a traditional IRA. The child takes control at 18. Withdrawals before 59½ face income tax plus a 10% penalty, with exceptions for education and some home purchases.

Megan McCoy, a financial therapist at Kansas State University, said parents need to talk to children early about the money being invested for them. "If the intention is to scaffold your future and give you less financial stress, there has to be discussion so that it doesn't just feel like found money," she said.

Jon Lapp, a certified financial planner with Haven Financial Advisors, put it bluntly: "A lot of 18-year-olds are not equipped to handle a lump sum of money." At best, they spend it frivolously. At worst, they owe a tax bill after the cash is gone.

That's where the tax lessons come in. With a custodial account like a UGMA or UTMA, the child owes capital gains tax when they sell appreciated assets. With a Trump Account, early withdrawals trigger both income tax and a 10% penalty unless the money goes to college or a first home.

The power of compound interest is the other big lesson. Morningstar projects that a child receiving $1,000 in annual contributions from birth would have more than $50,000 by age 18. If they never add another dollar, that same account could hold $850,000 by age 55, according to Morningstar's estimates.

McCoy said parents should tie these numbers to conversations about short- and long-term goals. "It's not having one conversation. It's having lots of conversations about your dreams and hopes for the future," she said.

The real risk, experts said, is that a teenager handed a five-figure account with no context treats it as found money. The KO stock page shows Coca-Cola's long-term returns, but the lesson applies to any holding. A New York Times article recently called children the "new investor class" as Trump Accounts roll out.

Lapp said the basics matter most: spend less than you earn, save the difference, invest it in something that grows. Explain the tax rules. Show the compounding math. Then let the child decide.

McCoy said the goal is not to dictate a path but to help kids articulate what they want. "It's not saying, 'This is a goal you have to pursue.' It's helping them verbalize what they want for their future and how you can help them get there."