Four Accounts to Give Your Kids a Head Start

Four Ways to Give Your Kids a Head Start (Without Overthinking It)

I have 4 children, and if there's one thing I've learned from both being a parent and doing this job for a living, it's that most of us are winging it when it comes to teaching our kids about money. We know it matters. We just don't always know where to start.

The account side of things is no different. Parents ask me some version of the same question all the time: "What am I actually supposed to be doing to save for my kids?" There are four main accounts most families end up using once they sort through the options. Here's the rundown:

The Trump Account

This one's brand new, so don't feel behind if you've never heard of it. It's a federal savings account for kids under 18, and if your child was born between 2025 and 2028, the government deposits $1,000 into it to get things started. From there, families can contribute up to $5,000 a year.

The money grows until your child turns 18, and then the account converts into a traditional IRA. So this isn't spending money for a car or a semester of college — it's an early jump on retirement, decades before most people even start thinking about that word. If you've got a young child, this one is worth opening for the free $1,000 alone.

Custodial Accounts (UGMA/UTMA)

If you want something flexible with almost no strings attached, this is your account. A custodial account (you'll see it labeled UGMA or UTMA) lets you invest on your child's behalf with no cap on contributions. You manage it while they're growing up, and once they become an adult — 18 or 21 depending on your state — it's theirs, to use however they want.

That last part is the trade-off. It's great because it's not locked into education or retirement. It also means your 18-year-old could technically use it for something you never had in mind. Most families are fine with that. Some aren't. Worth thinking through before you open one.

Custodial Roth IRA

This one only works once your child has actual earned income — a summer job, babysitting money, mowing lawns down the street. Once there's income, you can open a Roth IRA in their name and contribute after-tax dollars that grow completely tax-free from there.

What makes this account special is time. A 16-year-old who tucks away even a few hundred dollars has 50-plus years for that money to compound before retirement. It won't change their life at 16. It might change their life at 66.

529 Plans

If college is the goal, this is still the account to know. Money in a 529 grows tax-free, and withdrawals stay tax-free as long as they go toward qualified education costs — tuition, books, and a few other things the list keeps expanding on. There's no federal cap either, so if you're able to save aggressively, you can.

The catch is right there in the name — it's built for education. If your kid gets a scholarship or skips college altogether, there are ways to redirect the money, but it's not nearly as open-ended as a custodial account. Still, if school is the priority, nothing beats it.

So Which One Do You Actually Need?

Most families don't pick just one, and you probably won't either. A common combination looks like a 529 for school, a custodial account for everything else, a Trump Account if your kids are young enough to qualify, and a Roth IRA once they land their first real paycheck.

None of these need a big first deposit to matter. What matters is starting before you feel ready, because every year you spend "figuring it out" is a year these accounts aren't growing. You can adjust the plan later. You can't get the time back.