Saving for Their Future: 4 Ways to Invest in a Child’s Financial Future
By Erin Bradley, BFA™
One of the most common questions I get from parents and grandparents is some version of: “What’s the best way to save for my kids or grandkids?”
My honest answer is usually the same: it depends on what you want the money to do.
Some families are focused on education. Some are thinking about long-term retirement. Others simply want flexibility to support a child wherever life takes them. Most of the time, the strongest plans don’t rely on just one account—they combine a few in different ways.
Here’s how I think about the four most common options.
529 Plans: When Education Is the Priority
If education is the goal, a 529 plan is usually where I start the conversation.
These accounts are designed specifically for education savings. Contributions grow tax-deferred, and withdrawals are tax-free when used for qualified education expenses such as college tuition, trade school, and in some cases K–12 expenses.
A recent update under SECURE 2.0 allows for the possibility of rolling unused 529 funds into a Roth IRA for the beneficiary, subject to IRS rules, ongoing guidance, and eligibility requirements. This has added flexibility for families concerned about overfunding education savings.
Key benefits:
- Tax-deferred growth with tax-free withdrawals for qualified education expenses
- Potential state tax benefits in certain states
- Account owner retains control of the assets
- Unused funds may be eligible for Roth IRA rollover treatment (subject to IRS rules)
Important Roth rollover considerations:
- The 529 account generally must be open for at least 15 years
- Contributions made within the past 5 years are not eligible for rollover
- Rollovers count toward annual Roth IRA contribution limits
- The beneficiary must have earned income
- A lifetime rollover limit of $35,000 per beneficiary applies under current rules
Additional considerations:
- Non-qualified withdrawals may be subject to income tax and penalties on earnings
- Investment options are limited to those offered within the plan
- State tax treatment of rollovers may vary
For families focused on education, this remains one of the most structured and tax-efficient ways to save.
Custodial Roth IRAs: A Powerful Tool for Working Teens
If a child has earned income, a custodial Roth IRA can be one of the most impactful long-term savings tools available.
That income might come from a part-time job, babysitting, lawn care, or a family business, as long as it is properly documented.
The value of this account is time. Even small contributions can grow significantly when given decades to compound on a tax-free basis.
Why I often recommend it when appropriate:
- Tax-free growth and tax-free qualified withdrawals in retirement
- Contributions can generally be withdrawn at any time without tax or penalty (earnings are subject to Roth rules)
- Encourages early saving habits and financial discipline
- Long investment time horizon enhances compounding potential
Important considerations:
- The child must have earned income to contribute
- Annual contribution limits apply
- The account becomes the child’s property at the age of majority under state law
When it fits a family’s situation, this is one of the most efficient long-term wealth-building tools available.
Non-Qualified Brokerage Accounts: Flexibility First
A non-qualified brokerage account can be a flexible way for parents or grandparents to save for a child’s future without the restrictions of education- or retirement-specific accounts.
In many cases, I prefer these accounts to be owned by the parent or grandparent, with the funds earmarked for the benefit of the child or intended for future transfer when appropriate. This structure allows the adult to maintain full control while still setting assets aside for the child’s future needs.
Common ways these funds are used:
- Education expenses not fully covered by a 529 plan
- Assistance with a first home purchase
- Vehicle or transitional living support
- Wedding or major life event funding
- Longer-term wealth transfer later in adulthood
Why families use this approach:
- No contribution limits
- Full flexibility in how funds are used
- Broad investment selection
- Control remains with the account owner
Important considerations:
- Investment earnings may be subject to annual taxation
- Less tax-efficient than 529 or Roth IRA accounts
- Estate planning implications may apply depending on ownership and intent
I often describe this as the “flexibility bucket” in a family’s overall savings strategy.
Trump Accounts: A New Option Worth Understanding
Beginning in 2026, families have another savings option to consider: Trump Accounts. These accounts were created under federal law to encourage long-term investing for children and function similarly to a traditional IRA.
For children born between January 1, 2025, and December 31, 2028, the federal government provides a one-time $1,000 contribution if the account is properly established. Parents, grandparents, employers, and others may also contribute, subject to annual contribution limits.
Some potential advantages include:
- Eligible children may receive a one-time $1,000 government contribution
- No earned income is required for family contributions
- Tax-deferred investment growth
- Encourages long-term investing from an early age
Important considerations:
- Investment choices are currently limited to broad U.S. stock market index funds.
- Withdrawals generally are not available before age 18, and once the child reaches adulthood, the account is generally subject to traditional IRA rules.
- Contributions are subject to annual limits established under federal law.
- Because these accounts are new, additional regulatory guidance may continue to evolve.
For eligible families, the government's initial contribution makes this an option that's certainly worth exploring. That said, I don't necessarily view it as a replacement for a 529 plan or a custodial Roth IRA. Instead, I see it as another tool that may complement an overall savings strategy, depending on a family's goals.
Bringing It Together
Most families don’t need to choose just one account. In practice, many of the strongest plans use a combination:
- A 529 plan for education funding
- A custodial Roth IRA for long-term retirement savings (when earned income allows)
- A brokerage account for flexibility and future opportunities
- A Trump account possibly for newborns
The right mix depends on your goals, timeline, tax situation, and how much flexibility you want built into your plan.
If you’re trying to figure out how this fits into your family’s situation, this is exactly the kind of conversation I enjoy having with clients. There is rarely a perfect answer—but there is usually a thoughtful one that fits well.
About the Author
Erin Bradley, BFA™, is a Financial Advisor with Integrity Wealth Management in St. Joseph, Missouri. She is passionate about supporting career-driven women on their journey toward becoming self-reliant and financially independent.
Erin is actively involved in the community through a variety of volunteer efforts. She serves on the Board of Directors for the Junior League of St. Joseph and was recently nominated for the YWCA of St. Joseph's Women of Excellence in the Workplace Award.
When she's not working, Erin spends much of her free time cheering on her two sons at their sporting events and golfing with her husband, Wes.
This material is provided for informational and educational purposes only and should not be considered individualized investment, tax, or legal advice. Tax laws and contribution limits are subject to change. Investors should consult their financial, tax, or legal professional regarding their specific situation. Securities and investment advisory services offered through Osaic Wealth, Inc. member FINRA/SIPC. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth.
