Saving for children: A goal-based guide to Trump Accounts, 529s, Roth IRAs, and custodial accounts

Someone seeing an ad for Trump Accounts might wonder: “How is this different from the 529 plan and custodial account I already set up — and why would I open a retirement account for my 5-year-old?”

That question gets to the real issue: These accounts aren’t interchangeable, and the right choice depends on what you’re trying to accomplish.

Many American families are trying to balance two priorities: saving for their kids’ college and their own retirement. Now, with the introduction of Trump Accounts (also known as 530A accounts) in July 2026, there’s a new investment account option created especially for children. Alongside 529 plans, Roth IRAs, and custodial accounts, parents are weighing which option — or combination — makes the most sense.

The right account depends on whether you’re saving for your child’s education or retirement and how much flexibility and control you need. Sometimes you’ll want more than one. Bob Petix, a private wealth strategist with Wealth & Investment Management, breaks down how each account works and when to use it.

While these accounts may be grouped together when talking about kids and money, they are designed to work in different ways. Here’s how each one works.

Trump Accounts: This investment account is available to children under 18 and designed for long-term retirement savings, not necessarily educational spending. Eligible children born between 2025 and 2028 can elect to receive a $1,000 contribution from the U.S. Department of the Treasury. It’s not automatic, so you’ll have to file an election to claim it.

For older children, you can fund the account with up to $5,000 in annual contributions from sources such as family, friends, and employers. Nonprofits can also make contributions, which do not count toward the $5,000 limit. The federal government’s pilot program contribution also does not count toward that limit. Contributions grow tax-deferred, meaning the taxes are delayed until the money is withdrawn. The account converts to a Traditional IRA when the child turns 18. The account is in the child’s name, and an adult — typically a parent or guardian — is the custodian until the child turns 18. Investments are limited to low-cost mutual funds and ETFs (exchange-traded funds) that track broad U.S. market indexes.

The account matters less than the goal behind it. “There are so many arrows in your quiver. Understanding which arrows to select really depends on the target,” said Petix. And sometimes you’ll want more than one account.

• Parents saving for college: Consider a 529 savings plan.
• Parents wanting to start their child’s retirement investing early: Consider a Trump Account.
• Parents of working teens or kids with earned income: Consider a Roth IRA.
• Grandparents giving flexible financial gifts: Consider a custodial account, 529 plan, or Trump Account.
• Parents with significant assets to transfer: Consider trusts, which are customizable and able to address both education and broader financial goals, but don’t have the tax advantages of the accounts above.
• Parents with less money to contribute: Don’t count yourself out. Even small contributions can grow over time if you start early and stay invested.
• Parents who want to take advantage of free money: If you have an eligible child born between 2025 and 2028, consider applying to open a Trump Account and filing for the one-time $1,000 contribution from the federal government.
• Parents of children who are no longer children: You haven’t missed the chance to help them jumpstart their retirement fund. Petix recalled a friend with daughters in their early 20s who were starting their careers. “Instead of Christmas presents, he and his wife would contribute to their daughters’ IRAs, because while the young women did have earned income, they did not have a lot of disposable income to contribute to their retirement themselves.”

One of the biggest advantages you can give a child is time: The earlier money is invested, the longer it has to grow.

Over time, growth can build on itself. Learn how this works in more detail in our guide to compound interest and long-term growth. Introducing your children to how investing works can also help build knowledge and habits that can shape financial decisions later in life.

Starting early can help in different ways, depending on the goal. For education savings, more time may give 529 contributions a longer runway before tuition bills arrive. For long-term investing, early contributions can stay invested for decades, which is where Trump Accounts may have an advantage for young children who don’t have earned income.

“When you consider 18 years of growth before the Trump Account converts to an IRA, and then another 50 years of tax-deferred accumulation, even a small initial investment can make a meaningful difference by retirement,” Petix said.

Even small early contributions can snowball. Here’s how that looks on paper:

At a 6% annual return, a one-time $1,000 investment at birth grows to about $2,900 by age 18. If left untouched, it will grow to about $53,000 by the time your child is considering retirement at age 68. This example is for illustrative purposes only and does not represent the performance of any specific investment.

Now consider how additional contributions change the outcome: $5,000 a year (that’s less than $100 a week) for 18 years at a 6% return grows the account to about $154,000 by the time the child turns 18. If you make no further contributions and that money stays invested for another 50 years at the same rate, it could reach roughly $2.8 million.

That outcome isn’t driven by contributions alone. It comes from starting early and letting decades of compounding do the heavy lifting.

Where the accounts differ is in access and purpose. Trump Accounts remove the hurdle of earned income, a requirement that makes Roth IRAs inaccessible to most young children. The 529 plans serve a different goal. They’re built for education expenses and most effective when you’re confident your child will pursue some form of schooling.

Understanding how these accounts change as your child grows is just as important as knowing what they do today. Every account involves tradeoffs. The tax advantages that make these accounts attractive also come with rules, limits, and restrictions.

For families thinking about college financial aid (PDF), keep in mind that accounts in a child’s name are typically assessed more heavily than parent-owned accounts.

Trump Accounts

These long-term retirement accounts are opened in the child’s name and managed by a parent until age 18, when the account converts to a Traditional IRA and the child takes full control. Because no earned income is required, you can start contributing as soon as it’s open, which is its main advantage. The tradeoff is flexibility. Withdrawals are limited before the child turns 18. Once the account is converted to a Traditional IRA, if your child withdraws the money before retirement, IRA rules generally apply. That means your child will owe regular income tax on the amount plus a 10% additional tax on top of that, unless they meet certain exceptions. Petix recommends having that conversation with your child well before they turn 18. The account will be theirs, and so will the decision of what to do with it. It’s designed to stay invested for decades, not to be cashed out early.

Currently, there is uncertainty about whether the account will be treated as a student-owned asset and whether it will affect college financial aid eligibility.

529 Plans

While these accounts have some flexibility, they are most effective when education is the expected outcome. The account owner retains control, and beneficiaries can often be changed to another qualifying family member if the original beneficiary doesn’t pursue higher education or doesn’t fully utilize the funds. Some states offer a tax deduction even if you contribute to a 529 and withdraw the money right away for qualified K–12 expenses. That can make a 529 useful for current school costs, not just future ones.

If you don’t end up using all the money, you can keep it for your child’s future education, transfer it to another family member, or in some cases roll it into a Roth IRA for your child. Taking money out for non-education purposes may trigger taxes and a penalty.

For financial aid purposes, 529 plans are typically treated as parent-owned assets, which may reduce their impact on aid eligibility compared with accounts in a child’s name.

529 plans allow superfunding — contributing up to five years’ worth of annual gift-tax exclusions at once. That can give savings more time to potentially grow before education expenses arise.

Roth IRAs

This account is owned by the child from the start, so there’s no shift in control over time. The long-term advantage is tax-free growth, meaning your child won’t owe taxes on gains when they withdraw the money later, as long as they follow the rules. Qualified withdrawals in retirement are tax-free, though early withdrawals may trigger taxes and penalties. Contributions require earned income, which limits access for younger children.

“Because of the rather inflexible rules regarding Roths and earned income, most people are not in the position to take advantage of them for young children,” Petix said.

Roth IRA balances aren’t counted as assets on the Free Application for Federal Student Aid (FAFSA). However, untaxed IRA distributions are included in the financial information used to determine aid eligibility, so withdrawals can affect future financial aid awards.

Custodial Accounts

Managed by an adult while the child is a minor, these accounts can be used for a wide range of expenses as long as the spending benefits the child. Once the child reaches the age of termination, they take full control of the account and can use the money for any purpose. That shift in control is the main tradeoff.

Because the assets are in the child’s name, they’re typically assessed at a higher rate in federal aid calculations than parent-owned accounts, which can reduce eligibility.

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