The Best Accounts to Save For Your Child’s Future
Every parent wants to set their children up for success, whether helping with college, giving them a jumpstart on retirement, or funding their first business.
Fortunately, there are several types of accounts that can support those goals.
Let’s explore the main options and how the new “Trump Accounts” might be a good option for some families.
529s and Coverdell ESAs: The Go-Tos To Save For Education
The 529 plans and Coverdell Education Savings Accounts (ESA) are longtime favorites for education-focused savings.
529s tend to be more popular than Coverdells because they have:
No annual contribution limit (although contributions are subject to the gift tax exclusion)
No income limit (you can still earn $500,000 and still contribute)
No age limit (you can keep saving after your child turns 18)
On the other hand, Coverdell ESAs offer:
Broader investment options
More flexibility for kindergarten through 12th grade (K-12) expenses
I covered 529s in depth in a recent post; however, I wanted to highlight that the new tax bill significantly broadens what counts as a “qualified expense.”
Parents can now use 529 funds for:
Curriculum materials, textbooks, and online educational resources
Tutoring services (as long as the tutor is unrelated and qualified1)
Standardized testing fees (SAT, ACT, AP exams)
Dual enrollment programs (e.g., high school students taking college courses)
Educational therapy (occupational, behavioral, or speech therapy)
Beginning in 2026, the annual withdrawal limit for K-12 expenses will rise from $10,000 to $20,000 per student, per year.
New uses for 529s also include:
Postsecondary credentialing (like CFP® and CFA certifications, hey, I have these)
Fees for licensing or exams required to enter or maintain a profession
Continuing education expenses for credential renewal
UTMAs/UGMAs: Flexible but with Less Control
Uniform Transfers to Minors Accounts (UTMAs) and Uniform Gifts to Minors Accounts (UGMAs) are taxable custodial accounts.
Parents maintain control until the child reaches the age of majority (usually 18 or 21, depending on state law).
These accounts are easy to set up and can be used for any expense that benefits the child like education, a car, or even a down payment on a house.
Pros:
No restrictions on how funds are used
No contribution limit (though subject to gift tax exclusion)
Tax advantages
For 2025, the first $1,350 of income is tax-free and the next $1,350 is taxed at the child's tax rate (which is usually lower than the parent’s)
Cons:
Does not offer tax-deferred or tax-free growth like a 529 plan
Once the child becomes of legal age, they control the money
May negatively reduce financial aid calculations (think FAFSA)
Brokerage Accounts: Flexibility with Full Control
A brokerage account in your name (or jointly held with a spouse) gives you complete control.
There are no contribution limits, no early withdrawal penalties, and you control how the money is invested and spent.
Key benefits:
Maintain full ownership and discretion
Invest according to your goals and risk preferences
Distribute funds when and however you want
You’ll pay taxes annually on interest, dividends, and capital gains, but what you lose in tax efficiency, you gain in control and flexibility.
Trump Accounts: A Jumpstart to Retirement Savings
Trump Accounts, introduced in the new tax bill, offer a way to jumpstart retirement savings for children without the usual earned income requirements that come with traditional IRAs.
Key Features (starting in July 2026):
Up to $5,000/year in contributions for any child under 18 with a Social Security number
No earned income required
Contributions are not tax-deductible, but growth is tax-deferred
Governments, nonprofits, and employers can contribute up to $2,500/year
Investments are limited to low-cost U.S. equity index funds, with fees capped at 0.1%
Bonus: Children born in 2025, 2026, or 2027 are eligible to receive a $1,000 government-funded credit when a Trump Account is opened on their behalf.
When the child turns 18:
The account begins to resemble a traditional IRA
Pre-59½ withdrawal penalties apply, unless exceptions are met
Investment restrictions lift, and the full range of IRA options becomes available
Planning Idea: Consider Roth conversions while the child is still in a low tax bracket. This could turn tax-deferred growth into tax-free income later on.
Final Thoughts
Here’s one example of how a savings strategy might look:
There’s no single “best” account.
The right mix depends on your family’s values, goals, and vision for your child’s future.
One thing is universal: start early.
The earlier you save, the more time compounding has to work its magic.
Keep learning. Keep growing. Keep going.
Endnotes:
1: Qualified means the tutors must be one of the following: a licensed teacher, a current or former teacher at an eligible educational institution, or a subject matter expert in the relevant subject.
Now here’s what I’ve been reading, listening, and watching:
Sam Walton (the founder of Walmart) on Founders podcast
Frederick Smith (the founder of Federal Express) on Founders podcast
Just Keep Buying by Nick Maggiulli
The 5 Types of Wealth by Sahil Bloom
Children’s book (I have a 5-year old): Sleepytime by Joe Brumm (highly recommend this Bluey episode)
Here’s what I’ve been writing:
