Invest Like for Your Kids: Performance and Implications of Children's Investment Accounts on Portfolios in Adulthood

Abstract

We explore the performance of children’s investment accounts and their implications on portfolios in adulthood. We find that children’s accounts, often resembling passive investment strategies, yield annual returns three times higher with lower volatility compared to adults’ accounts. Risk-taking behavior on these accounts does not differ significantly for kids of different genders during early childhood. However, a notable shift occurs once boys enter their teenage years, as their accounts begin to mirror the investment patterns typically associated with adult men. Consequently, during this phase, boys’ accounts underperform relative to those of girls. Furthermore, we document that individuals whose investment accounts were initiated during childhood consistently demonstrate superior performance as young adults compared to peers who opened accounts themselves. The gap in risk-taking behavior observed between men and women is also narrower among these investors. These findings emphasize the influential role parental interventions play in shaping investment attitudes.

Keywords: child investment accounts, parental investments, portfolio performance

JEL Classification: G11, G40, G53