Let’s face it: Generations Alpha and Beta, encompassing children born from 2010 through 2039, may face greater financial challenges than their millennial and Gen X and Y predecessors. They’re facing a world where annual college costs could start at $50,000. Ever-rising housing prices may put home ownership out of reach for many, and even affordable rentals may be hard to find.
As a parent of a young child, there may not be a lot you can do to alter the realities of the world they’ll inherit. But what you can do, in addition to nurturing their growth and encouraging them to be the best they can be, is to consider taking advantage of strategies that may put them on a more secure financial footing when they reach adulthood.
1. Establish a 529 College Savings Plan
A 529 Plan is arguably the best option for parents and children who want to save for college. While accounts are funded with after-tax contributions, your child won’t pay any taxes on earnings or withdrawals if they use them to pay for qualified educational expenses.
And 529 Plans aren’t just for college. Withdrawals can be used to pay for vocational school tuition, tutoring, and post-college professional certification programs. And, up to $10,000 each year can be used to pay tuition for private elementary and secondary schools.
If there’s any money left over in the account after your child graduates, up to $35,000 may be rolled over into a Roth IRA if certain conditions are met.
One important consideration: In 30 states, 529 Plan contributions are state-tax deductible. However, most states require students (or parents) to contribute to their state’s 529 Plan to qualify for these deductions.
2. Take advantage of Trump accounts
These new savings accounts, which were enacted as part of the One Big Beautiful Bill Act, offer parents a way to start a Traditional IRA equivalent for their kids.
Parents can establish these accounts for any child who is under the age of 18 by the end of 2028. The U.S. government will automatically establish accounts for children born between 2025 and 2028 and seed them with a $1,000 contribution.
Parents can make after-tax contributions of up to $5,000 per year to each child’s account up until the year they turn 18.
Employers can contribute up to $2,500 annually to the account of an employee (this amount counts toward the $5,000 limit). States, tribal governments and qualified nonprofit organizations can contribute up to $1,000 annually to an account (these don’t count toward the $5,000 limit).
Assets in the account will be invested in a low-cost stock market index fund or ETF. Earnings grow tax-deferred until withdrawn.
At age 18, ownership of the account transfers to the child and the account essentially becomes a Traditional IRA. No further contributions will be allowed, but earnings will continue to grow tax-deferred, and distributions will be counted as taxable income. Owners will pay a penalty for withdrawals made before age 59½.
Compared to 529 Plans and minor Roth IRAs, Trump accounts don’t offer significant tax benefits for children. You should weigh the pros and cons before you contribute to one.
3. Evaluate pre-paid college tuition plans
Alaska, Florida, Maryland, Massachusetts, Michigan, Mississippi, Nevada, Pennsylvania, Texas, Virginia and Washington offer pre-paid tuition plans for certain state colleges. With these special 529 Plans, parents invest money to buy credits worth a specific percentage of future tuition costs for a chosen school. The 529 Plan administrator invests the money and payouts are guaranteed to cover the agreed-upon tuition amount when the child enrolls, no matter how much tuition has risen over that time or the value of the account has risen or fallen.
The main drawback of these plans is that if the student doesn’t want to go to a qualified state school, the tuition guarantees lapse. In most cases, the plan administrator allows the parents to take tax-free withdrawals of the current value of the account to pay for these college costs.
For parents who intend to send their children to a private college, some national 529 plans offer similar tuition-lock benefits for selected private higher education institutions.
4.Consider a UTMA/UGMA account
If you want to give your child a head start on saving for any kind of financial goal, a Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) account might be an option to consider.
UTMAs and UGMAs are taxable custodial investment accounts funded and managed by parents for the benefit of their minor children. You can contribute as much as you want on an after-tax basis.
Ownership of UTMA/UGMA will be transferred to your child when they reach the age of majority in your state. At that time, they can use the money for any purpose.
Like other taxable investment accounts, income and capital gains generated by the account are taxable every year even if the proceeds are reinvested.
During the years when you’re the custodian, the actual taxable account is calculated using a complicated formula that may be based on your child’s annual income, your own income, or a combination of both. If you’re financially savvy, you (or your financial advisor) may be able to take advantage of certain strategies to reduce or eliminate these so-called “kiddie taxes.”
5. Put your kids on a path toward financial literacy
From weekly allowances earned by chores to piggy banks with separate chambers for spending, saving, and giving, there are plenty of things you can do to help your young children understand the value of the money they earn or are given and how to save and use it wisely.
And if you decide to open and fund any of the accounts listed above, explain what you’re doing and why, so they can gain a greater appreciation of the money that will be available for them at different stages of their lives.
If you have any questions about these or other options, consider speaking with a financial advisor.
This article was authored by David Jaeger and Jeffrey Briskin. David is a financial advisor with Canby Financial Advisors, a SEC-registered investment adviser. SEC registration does not constitute an endorsement by the SEC nor a statement about any skill or training. David can be reached at 508.598.1082 or djaeger@canbyfinancial.com. Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.
The fees, expenses, and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that an education-funding goal will be met. In order to be federally tax free, earnings must be used to pay for qualified education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10 percent penalty. By investing in a plan outside your state of residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses.
©2026 Canby Financial Advisors.