When people think about financial planning for their kids, college savings usually comes to mind. But education is just one piece of the picture. With the right accounts, you can help your child build flexibility, confidence, and a real financial head start, often with modest amounts of money.
Here are three accounts worth considering, and what each one is best for.
- The 529 Plan: The Obvious One—For a Reason
A 529 is still the most efficient way to save for education. Contributions grow tax-deferred, and withdrawals are tax-free when used for qualified education expenses. Many people don’t realize 529s can also be used for trade schools, apprenticeships, and even (to a limited extent) student loan repayment. Newer rules have also added flexibility. In some cases, unused 529 funds can be rolled into a Roth IRA for the beneficiary, subject to limits and conditions. There’s still a risk of overfunding a 529, but it does reduce the fear that education savings are “trapped” if plans change.
If you’re fairly confident that college or training is in your child’s future, this is usually the first account to open.
- The Custodial Roth IRA: The Sneaky Power Move
If your child has earned income, even from part-time or summer work, they may be eligible to contribute to a Roth IRA. The contributions can come from you, so long as they don’t exceed the child’s earned income.
This account is incredibly powerful. Money grows tax-free, contributions (not gains) can be accessed later for major life expenses, and decades of compounding do the heavy lifting. A few thousand dollars invested early can turn into something meaningful by adulthood.
- The Custodial Brokerage Account: Flexibility First
UGMA/UTMA accounts aren’t tax-advantaged, but they offer flexibility. Funds can be used for anything that benefits the child, not just education or retirement. They’re often a good fit for teaching investing basics or for goals that don’t fit neatly into other account rules.
The tradeoff? At a certain age, the account legally becomes the child’s. That handoff should be intentional, not accidental.
The Bottom Line
You don’t need to choose just one. The right mix depends on your goals, your child’s age, and how much control you want long-term.
Opening the right account early isn’t about maximizing returns but creating options. At the end of the day, that’s one of the most valuable gifts you can give.
If you’re not sure which accounts make sense for your family, that’s exactly the kind of conversation we help clients think through.