Custodial Account Calculator: Project a Child's Account
Project how a custodial account could grow for a child, from a starting balance and steady monthly contributions until they come of age.
Adjust the inputs and select Calculate for a full breakdown.
Year-by-year growth schedule
Compare Common Scenarios
How the numbers shift across typical situations for this calculator:
| Scenario | Future value | Total contributions | Total interest earned |
|---|---|---|---|
| $2k · $150/mo · 7% · 18yr | $71,633.23 | $34,400.00 | $37,233.23 |
| $0 · $200/mo · 8% · 15yr | $69,207.64 | $36,000.00 | $33,207.64 |
| $10k · $100/mo · 6% · 12yr | $41,522.52 | $24,400.00 | $17,122.52 |
| $5k · $300/mo · 7% · 18yr | $146,779.00 | $69,800.00 | $76,979.00 |
How This Calculator Works
Enter the current balance, the average annual return you expect, the years until the child reaches the age of majority, and your monthly contribution. The calculator compounds the balance monthly and adds each contribution, showing the projected balance and the growth.
The Formula
Future Value with Regular Contributions
P = starting amount, PMT = monthly contribution, r = monthly rate (annual ÷ 12), n = number of months
Worked Example
With $2,000 saved, $150 added monthly, and a 7% average return over 18 years, a custodial account reaches about $71,600. Contributions account for $34,400; investment growth supplies the other $37,200.
Key Insight
A custodial account is flexible — the funds can be used for anything that benefits the child, not just education. The trade-off is control: at the age of majority the account legally becomes the child's, to use as they choose.
Custodial accounts vs 529 plans vs Coverdell
Three accounts for child savings. CUSTODIAL (UTMA/UGMA): no contribution limit; flexible use (not restricted to education); becomes child's property at majority; can be used for ANY purpose including non-education; kiddie tax above $2,500 earnings/year; counts heavily against financial aid.
529 PLAN: high contribution limits; tax-free for qualified education expenses; remains in parent's control even after age 18; state tax deductions in many states; minimal financial aid impact (5.6%).
COVERDELL ESA: $2K annual limit; tax-free for education K-12 + college; income limits.
For pure education funding, 529 plan is superior. UTMA/UGMA's flexibility comes at cost: child controls funds at majority (may not use for intended purpose), substantial financial aid penalty, and kiddie tax on substantial earnings.
When UTMA makes sense: family wants to gift assets to child for non-education purposes (first car, wedding, starter house); family is wealthy enough that financial aid isn't a consideration; child is responsible and likely to use funds wisely at age 18-21.
Kiddie tax — the tax on child's unearned income
Kiddie tax applies to child's unearned income (interest, dividends, capital gains) above certain thresholds. 2024 thresholds: first $1,300 tax-free; $1,300-$2,600 taxed at child's rate (typically 10%); above $2,600 taxed at PARENT'S marginal rate.
For UTMA account generating $5,000 in dividends and gains: first $1,300 tax-free + $1,300 at child's 10% = $130 + remaining $2,400 at parent's rate (assume 24%) = $576. Total kiddie tax: $706. The parent-rate-on-child's-income reduces the tax advantage of putting investments in child's name.
Strategy implication: kiddie tax limits how much investment income can be sheltered in custodial account. UTMA most beneficial when growth is in capital gains held until child files own return as adult (then taxed at child's then-lower rate or sold as adult), rather than continuously generating taxable dividends and interest.
529 plan advantage: no kiddie tax issue — all growth tax-free for education. UTMA more efficient when child sells appreciated stocks as adult at child's then-lower capital gains rate. Combined planning can use both: 529 for education-restricted savings; UTMA for flexible savings with delayed realization.
Custodial account vs 529 plan — comparison
Reference comparison of UTMA/UGMA custodial account vs 529 plan for child savings.
| Feature | Custodial (UTMA/UGMA) | 529 Plan |
|---|---|---|
| Annual contribution limit | Subject to gift tax ($18K) | No federal limit |
| Use restriction | None (any purpose) | Education only (mostly) |
| Control at age 18-21 | Child takes ownership | Parent retains control |
| Tax-free growth | No (kiddie tax) | Yes for qualified education |
| State tax deduction | No | Yes in 35 states |
| Financial aid impact | Severe (20% asset) | Minimal (5.6% parent asset) |
| Investment flexibility | Broad (stocks, ETFs, funds) | Limited (plan's options) |
For pure college funding, 529 plan is dramatically better. Custodial accounts are appropriate for: non-education savings goals; families not concerned about financial aid; teaching investing to teenagers (child can manage own UTMA at majority). For most families, prioritize 529 plan for education; supplement with UTMA only if specific non-education goal.
Frequently Asked Questions
What is a custodial account?
A custodial account, set up under UGMA or UTMA law, holds investments for a minor. An adult custodian manages it until the child reaches the age of majority.
How is a custodial account different from a 529?
A 529 must be used for education to keep its tax benefit. A custodial account can fund anything benefiting the child, but its growth has no comparable tax shelter.
Who controls the money?
The custodian manages it for the child's benefit until the age of majority. After that, the account belongs to the child outright, to use as they wish.
Is the growth taxed?
Yes. Investment income in a custodial account is taxable, and beyond a threshold the child's unearned income can be taxed at the parents' rate under the kiddie tax.
Does a custodial account affect financial aid?
It can. Because the account is the child's asset, it is generally weighed more heavily in financial-aid calculations than a parent-owned 529 plan.
When is this calculator unreliable?
When using custodial account for college savings without recognizing financial aid impact (20% of student assets vs 5.6% of parent assets in 529 plan) — substantial impact on need-based aid. Also unreliable when ignoring kiddie tax on substantial investment income above $2,600/year. For pure education savings, 529 plan is the superior choice in nearly all cases.
References & Authoritative Sources
- Internal Revenue Service (IRS) — Investment Income for Minors · consulted June 1, 2026 · Federal regulator on kiddie tax and custodial accounts
- FINRA (Financial Industry Regulatory Authority) — UTMA/UGMA Information · consulted June 1, 2026 · Industry regulator on custodial accounts
- Saving for College — UTMA vs 529 Comparison · consulted June 1, 2026 · Industry comparison of saving vehicles
Related Calculators
Data Sources & Benchmarks
This calculator draws on 3 independent, dated sources. The starting values for expected annual return are taken from the benchmarks below and refresh whenever the snapshots are updated.
Methodology & Review
Custodial account growth uses compound interest with contributions. The calculator returns balance projection. Custodial accounts (UTMA/UGMA — Uniform Transfers/Gifts to Minors Act) are U.S. accounts held in adult's name for minor child's benefit. Funds become child's property at age of majority (typically 18 or 21 depending on state). No contribution limits but contributions are completed gifts (subject to gift tax rules; 2024 annual gift exclusion $18,000/person/recipient). RELIABILITY: Reliable for direct calculation. Less reliable for college funding strategy because UTMA assets count heavily against financial aid eligibility (20% of student assets vs 5.6% of parent assets). Also unreliable when not considering tax implications — earnings above $2,500/year for child taxed at parent's rate (kiddie tax).
Updated