A custodial account in Canada is a bank account that's managed by parents, where the assets belong to or are shared by/with the children. Custodial accounts include trusts and RESPs for long-term use and bank accounts for kids or youth intended for short-term use.
Custodial accounts can help a child save to buy a home, pay for education, fund retirement, or simply to build generational wealth. These accounts aren’t just for parents to open – grandparents and friends can contribute or set up custodial accounts for a child, too.
Key Takeaways
- Custodial accounts in Canada include trusts, RESP, and RRSP.
- Parents, grandparents, and supportive friends can open custodial accounts for a child.
- Depending on the custodial account, the assets may or may not legally belong to the child.
What is a custodial account in Canada?
A custodial account in Canada is a financial account opened in a minor’s name but managed by an adult until the child reaches the age of majority. Custodial accounts help families save for a child’s future while providing the necessary adult supervision for financial decisions.
- Assets: The assets legally belong to the child, but the custodian oversees deposits, withdrawals, and investments. Taxes apply, depending on withdrawal and account type.
- Account types: Custodial accounts can be chequing, savings, investment, registered, or non-registered accounts with a variety of assets.
- Age of majority: At 18 or 19 (depending on the province), the child gains full ownership and control of the account.
Types of custodial accounts in Canada
Each type of custodial account in Canada has a different strategy for helping secure a child’s future. Some accounts are specific to education, retirement, general savings, or future investments. Canada does not have the equivalent of the custodial UGMA/UTMA in the US.
What can and can’t someone do with a custodial account? Minors can’t make trades or make major decisions for accounts like RESPs, RRSPs, and trust accounts. But minors can make day-to-day financial choices with youth chequing and savings accounts.
For each Canadian account below, the parent remains the custodian until the child comes of age.
Registered Education Savings Plan (RESP)
RESPs are used to set money aside for a child’s post-secondary education.
- Tax advantages: Income grows tax-free, and withdrawals for education are taxed in the child’s name (often at a lower rate).
- Flexible setup: Parents, grandparents, or anyone can open an RESP for a child as long as they have the child’s SIN. Multiple RESPs can exist for the same child, or multiple people can contribute to one RESP.
- Contribution limits: Lifetime contribution cap of $50,000 per beneficiary.
Registered Retirement Savings Plan (RRSP)
RRSPs are used for long-term savings, typically to be used during retirement.
- Eligibility: RRSPs are only available to your child if they have earned income and filed a tax return. Beneficiaries must be over 18 years old to contribute more than $2,000 a year.
- Parent involvement: Parents must provide a consent letter and maintain signing authority until the child turns 18.
- Tax benefits: RRSP contributions reduce taxable income, and investment income grows tax-deferred.
- Withdrawal options: Your child can borrow from their RRSP for education (via the Lifelong Learning Plan) or for buying a first home (via the Home Buyers’ Plan). Repayment is required.
Trust accounts
Formal trusts provide control over how and when funds are accessed.
- Customizable terms: You specify how and when the child will receive funds.
- Tax benefits: Beneficiaries with little or no income can receive dividend income that's tax-free.
- Two types: Testamentary (created through a will) or living trusts (set up during your lifetime) are options for minor custodial trust accounts in Canada. A guardian manages the trust until the child comes of age.
In-Trust-For Investment account (ITF)
An In-Trust-For (ITF) Investment account is a more flexible type of informal trust.
- Beneficiary control: The child legally owns the funds and gains full control at the age of majority.
- Flexible use: Funds are not restricted to specific purposes (like an RESP is limited to education).
- Tax rules: The adult (donor) pays taxes on interest and dividends, and the child pays capital gains tax upon withdrawal. Pay close attention to income attribution rules, which can be tricky at tax time if the custodian is not the legal parent.
Separate brokerage account
A separate brokerage account is often used by parents who want to invest on behalf of a child in a flexible, informal way without setting up a formal legal trust.
- Parental control: Minors cannot open their own brokerage accounts in Canada, but parents can open them and invest on their behalf.
- Non-specified purpose: Basic brokerage accounts are not custodial, so the assets belong to the guardian. However, you can still invest with the intention of saving for your child’s future.
Note that kids and teens cannot open a TFSA on their own. The account holder must be 18 or 19, depending on the province or territory where they live.
Who should consider a custodial account in Canada?
Everyone and anyone can consider a custodial account. This includes parents, grandparents, relatives, or family friends who want to help minors build savings for education, retirement, or generational wealth.
- Parents: Start by opening an RESP for your child and invite supportive relatives to contribute. Help them open a savings account when they have pocket money. Eventually, create and invest in an ITF investment account for your child’s future.
- Grandparents: Ask the child’s guardians what accounts they already have, and contribute. Make sure to adhere to overall beneficiary limits. Open a brokerage account or set up a trust account intended for your grandchild in the future.
- Friends: Ask the child’s guardians what accounts they already have, and contribute. Ask about providing paid work to your friend’s child if they want to open an RRSP for the child.
- Minors: For short-term use, ask your parent/guardian to help you open a youth chequing or savings account. For long-term growth, ask your parent/guardian to help you open an RRSP if you have earned income. If you don’t have earned income, ask to learn about investing through an RESP or brokerage account managed by your guardian.
Minors who want to open an account
If you’re under the age of majority and you want to grow your wealth, you have plenty of options in Canada. Some require a parent, but some do not.
Youth under age 18
This age group can consider savings, chequing, and RRSP accounts.
For daily use, minors can open chequing and savings accounts in Canada with the signature and consent of a parent/guardian (aka a custodial account). After age 12 or 14, most institutions will allow you to open a youth account without an adult custodian.
For education savings, you can ask your parents to start an RESP for you. You can contribute to this account if you wish.
For retirement, you can open an RRSP with parental signature but only if you have earned income and file a tax return.
Youth ages 18+
Investment accounts and TFSAs are good options for anyone in this age group.
For investment accounts, you must be over 18 to open your own investment account. Ask a guardian to open an in-trust-for (ITF) account on your behalf, and ask to help make decisions about investments.
For long-term savings, open a TFSA once you’re over 18. This is a tax-advantaged account with contribution limitations but no limitations on withdrawals.
Best custodial account in Canada
Each institution offers different account types, investment options, fee structures, and minimum investment requirements.
Here are some of the best favourite custodial accounts in Canada:
Trust options: Qtrade Investment Accounts
Qtrade offers trust account options with flexibility in managing investments for minors.
This is an excellent way to build generational wealth while maintaining control over the funds.
Looking to take your investments into your own hands? Qtrade Direct InvestingTM is a discount online broker that offers top-of-the-line portfolio analytics tools and a robust trading platform designed for new and experienced DIY investors. You can even trade over 140 specially-picked ETFs commission free.
- Fund your new account and get a $80 GeniusCash bonus
- Get up to $2,000 cash when you open new accounts
- Up to 5% cash back on every dollar invested
- Award-winning mobile app
- Select ETFs with no fees
- Educational tools
- Young investor pricing
- Discounts for active traders
- Options Lab
- Middle of the pack pricing
- $25 per quarter fee for smaller investors
$80 GeniusCash + Earn up to 5% cash back on deposits + 140+ ETFs with no trade fees
- Young Investor and Investor Plus pricing available
- 140+ ETFs with no fee trades
- Trial account available
- Second-to-none portfolio analytics tools (including scoring against key ESG components)
- Pre-market and after-hours trading available for US markets
- Cash
- TFSA
- RRSP
- Spousal RRSP
- LIRA
- RIF
- LIF
- RESP
- Margin
- FHSA
- LRSP
- Corporate
- Formal Trust
- Informal Trust
- Investment Club
- Estate
- Stocks
- ETFs
- Mutual Funds
- Bonds
- New Issues
- GICs
- Options
$80 GeniusCash + Earn up to 5% cash back on deposits + 140+ ETFs with no trade fees
RRSP: TD Direct Investing
TD Direct Investing allows minors with earned income to open RRSPs under parental consent.
In this account, you can access diverse investment options like stocks, ETFs, and mutual funds.
Like all of the Big 5 Banks, TD offers convenient online investing tools that regular people (not just professional traders) can use to manage their own investments. The TD Direct Investing Platform has high per trade fees, but does offer some pretty interesting educational materials and opportunities to help new and advanced investors.
- No minimum investment needed to open an account
- Some transfer fees may be reimbursed
- Active trader discount
- Variety of trading and investing platforms
- Wide array of free tools and market research
- Cash back offer
- High fees per trade can add up fast
- $25 per quarter inactivity fees
- No practice accounts
- No way to automate certain account activities
- Video series to learn about investing
- Daily live, interactive Master Class workshops
- Free investment research and tools
- TFSA
- RRSP
- RESP
- RRIF
- LIRA
- LIF
- RDSP
- Cash account
- Margin account
- FHSA
- Stocks
- Mutual Funds
- ETFs
- Options
- Fixed Income
- GICs
- Cryptocurrency ETFs
RESP: Scotiabank RESP
We like that Scotiabank RESPs offer competitive interest rates and seamless access to government grants like CESG.
Parents, grandparents, or friends can open an account for a child.
Savings or chequing account for kids: Tangerine and CIBC
The best savings account for kids is the Tangerine Children’s Savings Account, with good interest rates and no fees.
Designed for kids and teens aged 12+, the CIBC Smart Start Account has no monthly fees, free Interac e-Transfers, and parental management options. Chequing features grow with your child in this custodial account as they get older and more responsible.
The Tangerine Children’s Savings Account is a no-fee kid’s bank account designed to help parents and guardians encourage the habit of saving early in life. It offers a modest 0.4% interest rate, the ability to set up automatic savings plans, and a separate login for kids to manage their account online.
- No monthly or service fees
- The child gets their own client number and login
- Earn 0.4% interest
- No welcome bonus
- There are other youth accounts with more perks
- Only for children 11 years old and younger
- 11 years old or younger
- Must open an adult savings account
- Canadian citizen
- Unique client number and login
- Competitive interest rate (for youth accounts)
The CIBC Smart Start Account is a chequing account tailored for Canadians under the age of 25, and its convenient features make it very attractive, especially to students. And since CIBC is one of Canada's big 5 banks, the young account holders can rest assured of their bank's security and reliability.
- No monthly fees until age 25
- Unlimited transactions
- Free SPC+ membership
- CIBC Investor's Edge trading perks
- Save up to 10 cents per litre on gas
- Welcome and referral bonuses
- Converts to the CIBC Smart Account at age 25
- Unaffiliated ATM fees are rather high
- Under 25 years of age or a parent of a youth under age 13
- Free SPC+ membership
- Earn up to $500 each year with referrals
- Save on gas with Journie Rewards
Pros and cons of custodial accounts
Major pros of custodial accounts include tax advantages and parental control. And while there’s no real downside to putting away money for a child’s future, there are a few considerations.
| Pros | Cons |
|---|---|
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$75 GeniusCash + Unlimited transactions for $0 + Ding-free non-affiliated ATM usage.
$25 GeniusCash + $50 bonus for funding a new account, and $0 commissions on stocks & ETFs
$12 GeniusCash + Access trusted news coverage 24/7 + Digital and home subscription options.
$25 GeniusCash + Delicious meal choices with fresh ingredients + Front-door delivery.FAQ
Can you open a custodial account in Canada?
Yes, custodial accounts are available in Canada, often through trust accounts. Parents or guardians manage the funds for the child's benefit until they reach the age of majority – typically 18 or 19, depending on the province.
What is the best custodial account in Canada?
Major banks offer some of the best custodial accounts in Canada, like RESPs or savings accounts managed by the parents/guardians. We like TD, BMO, Scotiabank, and Qtrade for investing. Try Scotiabank and Tangerine for adult-managed kids’ accounts.
Does TD have custodial accounts?
TD offers custodial-style accounts, such as in-trust accounts, where a parent or guardian manages funds for a minor. TD Direct Investing provides access to such accounts with a variety of investment options, including GICs, mutual funds, and stocks.
Does RBC offer custodial accounts?
RBC provides in-trust accounts, enabling parents or guardians to manage investments for a child. They also offer RESPs for education savings, which are even more valuable when used in tandem with government grants to help maximize contributions.
How to invest for your child in Canada?
Start with an RESP for education savings. Once they have earned income, open an RRSP for them. Use an in-trust account for flexible investments and family trusts for long-term financial planning to protect assets for your child’s future.
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