Start smart: A no-regrets approach to saving for children

Taking a few foundational steps now allows families to begin saving while maintaining flexibility to adjust as circumstances evolve. For many families, this can be a crucial first step into long-term investing, giving them the opportunity to build confidence and get into the habit of saving early.

Trump accounts—also known as 530A accounts—are a new type of IRA for children under 18. Although Trump accounts generally restrict access to the money before the beneficiary turns 18, they allow for contributions without an earned income requirement, giving families the chance to start saving and investing for children earlier.

For eligible children born between 2025 and 2028, the federal government provides a $1,000 seed contribution. Additional contributions may be available through philanthropic grants, employers, or state governments.

Once a Trump account is established, almost anyone can contribute to it, including individuals, employers, government entities, and charitable organizations. Government and charitable contributions won’t count toward the $5,000 annual contribution limit per child. Individual contributions are generally after tax, though parents may be able to contribute to 530A accounts on a pre-tax basis through their employer.

If a child is eligible, opening a Trump account and claiming available “free” money—including seed money for newborns, charitable contributions for children of different ages, and potential pre-tax employer contributions—allows families to take advantage of incentives that may not be available later.

Trump accounts can be a way to teach kids about investing and the power of compounding. Contributions are automatically invested in a low-cost U.S. equity index fund. When the child turns 18 and is eligible to withdraw funds, the adult child will have not only a nest egg that could be used for emergencies, a down payment on a home, or retirement savings, but also the experience of investing.¹ Vanguard research shows that people who received investments as a childhood gift were more likely to identify as an investor decades later and have more confidence in their financial knowledge.²

Opening and funding a 529 plan early offers a tax-advantaged way to save for education. These plans can be used for a wide range of education expenses, including K–12, college, graduate school, trade school, apprenticeships, and credentialed learning. They can also cover costs such as room and board, books, and supplies. Investments in a 529 plan grow tax-free, and families pay no federal income tax on withdrawals used for qualified education expenses.³ Depending on the state of residence, contributions may also qualify for a state tax deduction.

529 plans can be especially valuable for families who aren’t yet certain how much of their savings they’ll need for education expenses. If education becomes the primary goal, the account is already in place. If priorities shift, the early start can still provide flexibility. Up to $10,000 can be used to pay student loans, while counting as qualified expenses that don’t incur federal income taxes on withdrawals. Longer term, 529 plans now allow rollovers to Roth IRAs (up to $35,000 lifetime) for the account beneficiary.⁴  Because accounts must be open for at least 15 years before rollovers are allowed, starting early is key.

As goals become clearer, families can determine which account types should receive larger allocations and how to direct future contributions. Other specialized accounts may also play a role, depending on individual needs.

To keep saving strategies aligned with priorities, families should revisit their plans once a year. They should also revisit their plans if they experience a meaningful change in how much they can save, or when the child reaches a new life stage, such as changing schools or getting a job.