Micro-Investing for Your Kid's Future

Investing takes on a whole different meaning when you have children. Between juggling new expenses, saving for your kid's future, figuring out how to invest for retirement and college at the same time, and wondering how to teach your kids about investing, building wealth gets a lot more complicated when you introduce little ones into the mix.

Micro investing can help ease many of the stressful concerns that come up when you're investing with kids. This investing method of starting small and working your way up over time makes saving money for your children practically painless, and it can help you educate your kids on how to invest along the way. Here's how to use micro investing to your advantage when you're raising kids.

Micro investing is saving small amounts of money—often a few dollars, or even spare change—in an investment account where it can grow over time. This money is typically invested in the stock market, whether through index funds, ETFs, or fractional shares of stocks. It might feel like micro investing has a minimal impact on your financial future at first, but stashing away a few dollars here and there can add up faster than you think.

This style of investing has grown in popularity in recent years thanks to the proliferation of investing apps that let you invest with your spare change. Whereas traditional investment accounts often require investment minimums of hundreds or thousands of dollars, plenty of robo advisors have a minimum investment requirement of just $1. What's more, some of these investing apps come with features like the ability to round up purchases and invest that spare change automatically, making it easy to save and invest money without even thinking about.

While micro investing is usually geared towards beginner investors who just want to dip their toes in the market waters, it's also a great option for parents who want to save a little something extra for their kid's future. 

You can still invest in a college savings account and even consider setting up a trust fund for your child. Of course, there are always additional expenses that come up as your child grows into adulthood. They might want to study abroad in college or go on an educational trip in high school. Having a little extra money on hand could help them fund a gap year or support themselves while they intern after college. 

Adding a micro investing app into the mix is a convenient way to start saving so your kids can enjoy those kinds of experiences and opportunities. With a long time horizon, you've got plenty of years to let those small investments grow into something more substantial. If you invest just $1 a day and earn average market returns, you'd have over $5,000 in 10 years. In 20 years, you'd have nearly $16,000 in spare change saved up, which is enough to cover a typical semester abroad.

If you wish you'd started investing early, you're in the majority. You might not be able to go back in time, but you can set your kids up to get started earlier than you did by teaching them about investing from a young age.

Micro investing apps are perfect for this because they allow you to invest with small amounts of money. They're also extremely easy to use and often incorporate lots of educational materials. You can either give your kid limited access to your account, or you can open an account for them. A number of different robo advisors offer accounts that are specifically geared toward investing for kids. Here are some ways to use micro investing as an educational tool.

Have your kid invest their allowance

If your child earns an allowance, micro investing apps are the perfect way to help them learn about investing with their own money. Because it's possible to start small, your kid can start investing their allowance even if they're only earning a few dollars here and there.

Get your kids to round up and invest their spare change

Some micro investing apps let you connect a debit card, round up your purchases, and invest the spare change. Once your kid is old enough to get their own bank account and debit card—many banks offer teen checking accounts for kids ages 13 to 18—you can open a micro investing account for them and have them turn on the spare change feature.

Encourage your kid to invest a portion of their holiday money

Do friends and relatives tend to send checks and cash to your kid on their birthday or during the holidays? You could encourage them to invest a portion of their holiday money. While it's hard to convince a kid to forgo instant gratification, micro investing apps make it easy to track your progress and watch your money grow, which might help motivate them.

Help your kid set up automatic recurring investments when they get their first job

Most investing apps make it easy to set up automatic recurring deposits. You can help your kid set up their accounts so that a small portion of their paycheck goes into their investment account the day after payday. If your kid starts investing at age 18 and stashes away $150 from each biweekly paycheck, they'll be a millionaire by the time they reach retirement age without doing anything else.

Your kid has to be at least 18 years old to invest in stocks or open a brokerage account—and that includes robo advisors. However, you can open a custodial account, which is a savings or investment account that you manage on behalf of your child. The assets in this type of account belong to your child, and they'll gain full access to the account when they turn 18 or 21.

There are dozens of micro investing accounts out there, but a few are particularly well-geared toward saving for your kids. These are our favorites.

1. Acorns

Acorns is famous for their "Round-Ups" feature, which lets you round up purchases and invest the spare change. You can also set up automatic recurring investments of as little as $5 every month, week, or day. They also offer Acorns Early, an account specifically designed for investing for your kids.

The app is packed with handy educational features, and there's no minimum investment required. Fees are relatively low—you'll pay $3 per month for a personal plan or $5 per month for a family plan.

2. Stash

Stash lets you set up automatic investments on a weekly, biweekly, or monthly basis, and you can invest with as little as $5. You can also set up your paychecks so that a portion is direct deposited into your Stash account and invested according to your goals. The app offers children's custodial accounts that come with tools to help your kid learn about investing.

Plans start at just $1 per month for beginner investors. The app is designed to help you go from novice to pro, and as such, you can also upgrade to a growth account for $3 per month or a Stash+ account for $9 per month. The Stash+ account comes with two kids portfolios and professional investing advice.

3. EarlyBird

EarlyBird is an investing app that's all about saving for your kid's future. You can open a custodial account for your child through the app and get started investing with as little as $1. Your money is then invested automatically based on your child's age, your investing goals, and your risk tolerance. Handy features include the ability for friends and family members to "gift an investment" to your kid and the opportunity to record a short video with each investment gift.

You can choose from five different portfolios that range from extremely conservative to extremely aggressive. There's no set-up fee, and the first $200 you invest is free. After that, there's a $1 per month fee for each child.