Among Refresh Wealth clients, there have been quite a few babies born over the past year! There are even more new additions expected throughout the remainder of 2026, so I wanted to focus this post on a topic that may be relevant for your family.
“What options exist for investing in my child’s future?”
I’ve outlined a few of the accounts that are relevant for parents with young children below.
Dependent Care Flexible Spending Accounts – While these are not accounts for investing in your child’s future, they are an attractive option for anyone who is paying for childcare expenses. Childcare expenses are often a large line item in the budget for families with young children, so FSAs can provide a bit of relief by covering some of these expenses with pre-tax dollars.
How: Through your payroll deductions, you can contribute up to $7,500 to an FSA and reimburse yourself for childcare expenses.
529 Plans – These are tax-advantaged education savings accounts. In addition to college expenses, these can be used for K-12 tuition ($20,000 / student annually), tutoring, online education subscriptions, and test prep services. You can change the beneficiary on the account or you can use up to $35,000 to start a Roth IRA for your children, if there are excess funds.
How: A lot of states offer tax-advantages for enrolling in the state-sponsored 529 plan. For any states that don’t offer tax benefits, my preference is My529 due to their robust investment options and below average administrative costs.
Custodial Accounts – For parents who prefer to have more flexibility in saving for their child’s future, establishing a Uniform Gift to Minors (UGMA) account can be a great option. These accounts are opened in the parents name and can be used for any purpose that benefits your child (i.e. down-payment on a home or wedding). The account transfers to your child at the age of majority (18 or 21, depending on state law) and they have discretion on how to use the funds. Lastly, a portion of the investment earnings are taxed at the child’s lower tax rate, providing some relief compared to holding these assets in a parent’s name.
How: You can open these accounts at any major financial institution (i.e. Schwab, Fidelity, Vanguard) and each parent can contribute up to the annual gift exclusion ($19,000 in 2026).
Trump Accounts – For any child born between January 1, 2025 and December 31, 2028, they are eligible to receive a $1,000 deposit from the U.S. government. In addition, parents are eligible to contribute up to $5,000 annually per child. These funds must be invested in index funds and can’t be accessed until the child reaches age 18. The account grows tax-deferred and upon withdrawal, the funds are taxable at ordinary income tax rates. (Think of an IRA for your child).
How: You can open a Trump account by completing this online application. Additionally, you will want to include a Form 4547 with your tax return in the year established.
Trust Accounts – Establishing a Trust account can be an attractive option for any child with special needs or for families who are seeking to transfer significant wealth to the next generation. Trusts can provide additional protection over the assets, offer potential tax benefits, and enable the parents to have more control over how and when the funds are used. That said, this often comes with more administrative complexities (i.e. filing an annual tax return for the trust) and higher costs to set-up and manage going forward.
How: First step is to discuss the trade-offs of establishing a trust with a financial planner and an attorney. If you decide to go this route, the next step is mapping out the initial funding plan for the trust.
As you can see, there are a variety of account types to save for your child’s future. There isn’t a “better” or “worse” option, each of these accounts have trade-offs. So if you’re thinking about what makes sense for your family, I’d be happy to discuss which account best aligns with your intentions.