Saving for Children and Grandchildren: Comparing Four Account Types

Saving for your Children or Grandchildren

With the new Trump account, you may be wondering if it is a good option for your child or grandchild. Below are the 4 main options to consider when it comes to investing for your children or grandchildren. I shared more thoughts in the video here.

Summary: Utilize 529 if you value tax efficiency and don't mind locking up funds only for education. Save enough to cover for public in-state tuition Save additional funds into brokerage account in your name for flexibility Enroll in Trump account if child born in 2025 - 2028 to take advantage of initial $1,000 seed money. Avoid custodial accounts if you don't want to be forced to hand over funds at age 18

Advanced Strategies: Roll unused 529 funds into Roth IRA ($35,000 limit) If still have unused funds in 529, change the owner to your child to avoid paying the higher income tax associated with your income (still have 10% penalty) When Trump account changes to IRA at age 18, consider converting a portion of the funds to a Roth IRA given the child may be in a 0% tax bracket or a very low bracket.