Every parent wants to give their child a strong start. And planning ahead financially is one way to help create opportunity and a sense of stability for them in the years to come. 

From specialized, tax-advantaged accounts to more flexible investment vehicles that adapt as your family’s needs evolve, there are many options for parents to help create a strong, lasting financial foundation for their children. What’s right for your family will depend on your financial goals, values and personal preferences. 

An Ameriprise financial advisor can help you determine which option is right for your family’s unique needs and goals and help you build a personalized strategy to invest for the next generation.  

 Here are eight ways to save for your child’s future: 

1. 529 plans 

What is it? 529 plans are tax-advantaged savings accounts designed specifically to help pay for education expenses. Anyone can contribute to these accounts, and they are generally owned by a parent or grandparent, who has the flexibility to change beneficiaries and disburse funds at their own discretion.  

What can the funds be used for? Funds can be used for qualified higher education expenses, such as tuition, fees, books and certain room-and-board costs. Some plans also allow funds to be applied to K-12 tuition. 

Tax advantages: Contributions grow tax-free, and withdrawals are also tax-free when used for qualified education expenses. 

Whose money is it? Money you contribute to your child’s 529 plan continues to be yours (though it is treated as a gift for gift tax purposes). It can be transferred to another child’s 529 plan or used for your own expenses — though earnings will be subject to income taxes and a 10% penalty.  

Other considerations: Contribution limits are relatively high. If your child doesn’t use all the funds for education, certain unused assets may be rolled over (within limits and subject to rules) to a Roth IRA owned by the 529 plan beneficiary after 15 years. 

Learn more: 529 plans: frequently asked questions 

2. UTMA/UGMA custodial accounts 

What is it? Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA) accounts allow an adult to transfer assets irrevocably to a minor, with a custodian managing the account until the child reaches the age of majority — typically 18 or 21 (and in some cases up to 25) depending on state law. 

What can the funds be used for? Funds can be used for a broad range of expenses that benefit the child, including education, transportation, housing or other personal needs — if the expenditures are for the child’s benefit and not simply replacing a parent’s basic support obligations. 

Tax advantages: Some unearned income may be taxed at the child’s rate. However, income above certain thresholds is taxed at the parent’s rate under “kiddie tax” rules. 

Whose money is it? Once contributed to an UTMA/UGMA account, the money no longer belongs to you and you have a fiduciary duty as the custodian to manage it in the best interest of your child. You cannot give the money to another child or use it for your own expenses.  

Other considerations: Once the child reaches the age of majority, they gain full control of the assets. These accounts are also considered the child’s assets, which may affect eligibility for financial aid. 

3. Custodial IRAs 

What is it? A custodial IRA is an IRA opened and managed by an adult for a minor who has earned income. The minor owns the account, and control transfers to them once they reach adulthood. 

What can the funds be used for? The funds are intended for retirement. Early withdrawals may be subject to taxes and a 10% penalty. However, withdrawals used for qualified higher education expenses may be exempt from the 10% early withdrawal penalty, though taxes may still apply depending on the type of IRA. 

Tax advantages: With a Roth custodial IRA, contributions are made with after-tax dollars, and qualified withdrawals in retirement can be tax-free, potentially allowing decades of tax-free growth. If used for higher education expenses, withdrawals of contributions are always tax- and penalty-free and taken out first. Withdrawals of earnings may be exempt from the 10% early withdrawal penalty but are generally still subject to income tax unless they qualify as tax-free distributions. 

Whose money is it? Once you contribute funds to a custodial IRA, the money no longer belongs to you and you have a fiduciary duty as the custodian to manage it in the best interest of your child. You cannot give the money to another child or use it to cover your own expenses. 

Other considerations: Contributions are limited to the child’s earned income for the year, up to annual IRA limits. Earned income is required. Once the child reaches the age of majority, they gain full control of the assets

Learn more: Roth IRA benefits: 5 reasons why Roth IRAs can be a powerful investment tool 

4. Trump Accounts 

What is it? A Trump Account is a tax-advantaged retirement savings account for minor children, designed to function like a starter IRA but with different rules and lower contribution limits. It allows for direct contributions, employer contributions, qualified general contributions from charitable organizations or government entities and the $1,000 pilot program for beneficiaries born between 2025 and 2028. 

What can the funds be used for? Funds are intended for retirement-related purposes. 

Tax advantages: Contributions are made with after-tax dollars, growth is tax-deferred, and withdrawals are taxed as ordinary income. 

Whose money is it? Once you contribute funds to a Trump Account, the money no longer belongs to you and you have a fiduciary duty as the custodian to manage it in the best interest of your child. You cannot give the money to another child or use it for your own expenses. 

Other considerations: There is no earned-income requirement. Withdrawals are not allowed until the beneficiary is 18. Taxable withdrawals after age 18 and before age 59½ generally incur a 10% penalty, but there are some exceptions. Investments are limited to specific low-cost U.S. equity funds. Once the child reaches age 18, they gain full control of the assets. 

Learn more: Trump Accounts: A guide for parents 

5. ABLE accounts 

What is it? An ABLE account is a tax-advantaged savings account designed for individuals with a qualified disability that began before age 46. 

What can the funds be used for? Funds can be used for a wide range of qualified disability expenses, including, but not limited to, healthcare, education, housing and basic living expenses. 

Tax advantages: Investments grow tax-free, and withdrawals for qualified expenses are also tax-free. 

Whose money is it? Once you contribute funds to an ABLE account, the money no longer belongs to you. If you are serving as the authorized legal representative, you have a fiduciary duty to manage the funds in the beneficiary’s best interest. The funds cannot be given to another child or used for your own expenses. 

Other considerations: Money held in an ABLE account generally does not count against asset limits for government benefits like Supplemental Security Income (SSI) or Medicaid. ABLE accounts can also accept rollovers in limited amounts from 529 plans, and transfers from Trump accounts, offering a convenient way to realign savings for long-term support. 

6. Taxable accounts in your name 

What is it? A taxable brokerage or savings account held in your own name allows you to invest money you intend for your child while maintaining full ownership and control over the money. 

What can the funds be used for? Funds can be used for any purpose, such as helping with a home purchase, starting a business or covering general expenses. 

Tax advantages: There are no special tax advantages — investment income and gains may be subject to taxes. 

Whose money is it? If the money is held in your own name, it’s yours to use however you like.  

Other considerations: You retain complete control over the assets and decide if, when and how the funds are used. 

7. Roth IRA account in your name 

What is it? A Roth IRA in your own name is a retirement savings account you own and control, funded with after-tax contributions that can grow tax-free over time. 

What can the funds be used for?  While designed for retirement, contributions can be withdrawn tax- and penalty-free at any time. Once you reach age 59½ and the account has been open at least five years, all distributions — including earnings — are tax-free. If you wait until age 59½, you have the flexibility to use the funds for whatever goal is important to you, whether that be helping your child with a home down payment, regularly gifting them money to invest or paying for their higher education costs. 

Tax advantages: Investments grow tax-free, and qualified withdrawals in retirement are also tax-free, providing long-term flexibility and tax-efficient income, when IRS requirements are met. 

Whose money is it? Money held in your own Roth IRA is yours. 

Other considerations: Because the account remains in your name, you maintain full control and can use the funds for your own retirement or your child, though accessing earnings before age 59½ may result in taxes or penalties. 

8. Trusts 

What is it? A trust is a legal arrangement in which a grantor transfers assets to a trustee to manage them for the benefit of one or more beneficiaries, such as your children, according to the terms set out in the trust document. 

What can the funds be used for? Funds can be distributed for specific purposes such as education, healthcare or long-term financial support, depending on the terms set out in the trust document. 

Tax advantages: Tax treatment varies based on the type of trust and how it’s structured but generally trusts do not provide favorable tax treatment like 529 plans and IRAs do. 

Whose money is it? It depends on the type of trust. Trusts are either immediately irrevocable (meaning the money is owned by the trust and the trustee must manage it on behalf of the beneficiaries) or they become irrevocable at some point, such as at death. However, unlike a custodial IRA or Trump Account, you can include provisions within the trust that limit how the money can be spent.   

Other considerations: Trusts can offer long-term control, asset protection and multigenerational planning benefits. They typically require legal and professional guidance to establish. 

Learn more: When to consider advanced trusts in your estate plan 

Support your child’s financial future 

For personalized advice on savings strategies for your child’s future, reach out to an Ameriprise financial advisor for guidance.