Saving for My Child: More Options Than Ever

When you start thinking about saving for your kids’ future, one of the first questions is: Where do I even begin?

There’s always been talk about 529 plans, the go-to option for saving for college. They come with tax benefits, and until recently, felt like a no-brainer… as long as your child actually goes to college.

But what if they don’t? What if they want to become a firefighter, a mechanic, start a business, or take another path entirely?

That’s where things used to get complicated. But now, thanks to recent changes in legislation and new types of savings plans, families have more flexible options than ever.

529 Plans: Now More Flexible Than You Think

Let’s start with the 529 plan. It’s a tax-advantaged account meant for education expenses—college, trade school, even private K–12 tuition. But in the past, if your child didn’t use all the money for qualifying expenses, you’d face taxes and a 10% penalty to withdraw the remaining funds. Ouch.

Enter the SECURE Act 2.0, passed in 2022. One of its biggest improvements for parents? If you’ve had a 529 account open for at least 15 years, you can now roll over up to $35,000 of unused funds into a Roth IRA in your child’s name. That means the money keeps growing tax-free, just in a retirement account instead of a college fund.

You can also change the beneficiary on a 529 account, so if one child doesn’t need it, another can benefit.

As investment expert Ric Edelman says, “The flexibility now offered with 529 plans makes them far more appealing. You no longer have to fear that your money is trapped if your child chooses a different path.”

Why I Chose UGMAs for My Kids

When my children were toddlers, I decided to go with UGMA accounts (Uniform Gift to Minors Act) instead of a 529 or prepaid college plan. Why? Honestly, when your child is two years old, there’s just so much you don’t know. I wanted the money to belong to them, regardless of whether they chose college, a trade, or something else entirely.

That decision came with pros and cons.

What I liked:

• Flexibility in how the funds could be used (not limited to education)

• The ability to invest in a wide range of assets

  
  

What I didn’t realize at the time:

• The money legally belongs to them at age 18 or 21 (depending on your state)

• It counts against them on FAFSA when applying for financial aid

• They can use the money for anything - which can be a little scary depending on their maturity level

  
  

That last one is worth repeating: when they come of age, it’s their money, period.

A New Option: The Trump Savings Account

Another new option on the table is the Trump Savings Account, introduced through the “Big Beautiful Bill.” While the name grabs attention, the concept is actually pretty familiar - think of it like a child’s version of a retirement account.

Here’s what makes it interesting:

• If your child is born between January 1, 2025 and December 31, 2028, the government will automatically contribute $1,000 to kick things off.

• Parents can then contribute up to $5,000/year post-tax into an account that tracks a broad U.S. stock index.

• Employers can pitch in too, up to $2,500/year per child, and this amount won’t count as income for the employee.

  
  

The catch?

The money can’t be touched until the child turns 18, and even then, it’s subject to regular income taxes and a 10% penalty if used before age 59½ - just like a traditional IRA. However, exceptions apply for college costs, home purchases (up to $10,000), and a few other life milestones.

Another Approach: Keep It in Your Name

Sometimes the simplest route is the best: a brokerage account in your own name with your child listed as the beneficiary.

Why?

You stay in control. You decide when and how to gift the money, whether for college, a first home, a wedding, or maybe even seed money for a business. And if life throws you a curveball and you need those funds for your own retirement, they’re still yours.

As author and financial expert Suze Orman once said, “Before you invest in your child’s future, make sure you’ve secured your own.”

Final Thoughts

There’s no one-size-fits-all solution when it comes to saving for your children. Whether it’s a 529, a UGMA, a Trump Account, or a good old-fashioned brokerage account, the most important step is simply to start.

Start small. Start early. And stay flexible.

Because your kids’ futures might not look like you imagined—but that doesn’t mean you can’t help them build something amazing.

Keep saving. And if you need someone to talk through options with, reach out anytime.

-       Shannon

Sources:

• SECURE Act 2.0: Congress.gov

• Trump Savings Account details based on 2024 legislation

• UGMAs and 529 plan comparisons: Investopedia

  
  

Investors should carefully consider investment objectives, risks, charges, and expenses. This and other important information is contained in the fund prospectuses, summary prospectuses and 529 Product Program Description, which can be obtained from a financial professional and should be read carefully before investing. Depending on your state of residence, there may be an in-state plan that offers tax and other benefits which may include financial aid, scholarship funds, and protection from creditors. Before investing in any state's 529 plan, investors should consult a tax professional. If withdrawals from 529 plans are used for purposes other than qualified education, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax.