That uncertainty is exactly why thoughtful planning often involves multiple savings vehicles, each designed to serve a different purpose. Rather than attempting to forecast a child’s future path with precision, many families choose to build flexibility into their plans, recognizing that optionality can be just as valuable as growth potential or tax efficiency.
Howe & Rusling has published a range of educational articles, videos, and webinars focused on saving for children and grandchildren, including guidance on 529 plans, custodial accounts, and newer planning tools. Across these resources, a consistent theme emerges: there is no universally “best” account—only the account, or combination of accounts, that aligns with a family’s specific goals, values, and time horizon. Understanding how different tools work and interact can help families make confident, long‑term decisions.
Why Starting Early Matters
Time is a powerful variable in long-term planning. Starting early allows compounding to work quietly in the background and reduces the pressure of larger contributions later in life. According to the Investor.gov, the effect of compounding over long time horizons can materially influence outcomes even when contributions are modest.
Starting early can also make saving feel more manageable. Smaller, consistent contributions spread over many years may be easier to sustain than larger contributions compressed into a shorter window. Over time, this approach may help families stay disciplined and avoid reactive decision-making as major milestones approach.
This philosophy helped guide my own planning. After my daughter, who is now 4, was born, I opened a 529 college savings plan for her. At the time, college felt far away (and still does!) but that long time horizon was an important consideration in beginning to save early. The decision wasn’t about fully funding an unknown future expense immediately; it was about starting a process that could grow with her.
529 College Savings Plans: A Foundation for Education
529 plans remain a cornerstone of education planning for many families. In StreetSmarts: 529 College Savings Plans – A Comprehensive Guide, my colleague, Dylan Potter, CFA, CFP®, Vice President and Senior Wealth Manager at Howe & Rusling, outlines why these plans continue to play a central role in education funding strategies.
At a high level, 529 plans offer several features that make them particularly well‑suited for education goals:
- Tax‑advantaged treatment when funds are used for qualified education expenses, as defined by the IRS
- Broad flexibility across eligible colleges, universities, and certain K‑12 education expenses
- Account control retained by the account owner, often a parent or grandparent
Nationally, 529 plans are supported and regulated at the state level, with oversight and education provided by organizations such as the College Savings Plan Network.
For families with a clear education objective, 529 plans can be highly effective. However, these accounts are education‑specific tools. While that focus can be a strength, it also means they may not address every long‑term planning goal on their own, particularly if a child’s path diverges from traditional education models.
Understanding the Broader College Savings Landscape
Education planning rarely exists in isolation. In Saving for a Child: Which Account Type Is Right for You?, Michael Carrico, CFP®, CRPC®, Wealth Manager at Howe & Rusling, explores how different account types serve different purposes—and why flexibility matters.
Similarly, StreetSmarts: Demystifying College Savings Vehicles, by Sarah Swan, CFP®, Vice President and Wealth Manager, examines the trade‑offs among common options, including custodial (UTMA/UGMA) accounts.
Custodial accounts can offer flexibility, as funds may generally be used for a wide range of expenses that benefit the child. However, they also come with important considerations:
- Assets irrevocably belong to the child once contributed
- Control transfers to the child at the age of majority
- Earnings may be subject to annual taxation under the IRS “kiddie tax” rules
Because of these characteristics, custodial accounts require careful planning around control, taxes, and long-term intent. They may be appropriate in certain situations, but they are not always interchangeable with education specific or long-term investment vehicles.
Trump Accounts: A New Long-term Savings Option for Children
One of the most notable recent developments in children’s planning is the introduction of Trump Accounts, established under recent federal legislation. These accounts represent a new approach to encouraging early, long‑term investing for children and have generated interest among both parents and grandparents. As with any new savings vehicle, however, they come with distinct rules, limitations, and considerations that are important to understand in context.
In a recent recorded Howe & Rusling webinar, Dylan Potter, CFA, CFP® provided an in‑depth overview of Trump Accounts, drawing on current IRS guidance and commentary from the U.S. Department of the Treasury. His insights are also reflected in Howe & Rusling’s published resource, Trump Accounts: A Guide for Parents & Grandparents.
Key Characteristics of Trump Accounts discussed in Dylan’s webinar:
- Trump Accounts are established for children under age 18
- Contributions may be made regardless of earned income
- Accounts are designed with a defined “growth period” during childhood, during which special rules apply
- Investment options are intentionally limited to promote long‑term, disciplined investing rather than short‑term trading
During the growth period, assets are generally intended to remain invested, with limited or no access to withdrawals, reinforcing the long‑term nature of the account. These restrictions are a key distinction between Trump Accounts and more flexible savings vehicles.
Government Seed Money: A Unique Feature
One distinctive feature of Trump Accounts is a government funded pilot program designed to encourage early participation. Under this program, a $1,000 seed contribution is provided by the federal government for U.S. citizen children born between January 1, 2025, and December 31, 2028.
This seed contribution does not require a matching contribution from families to qualify, but it does require that a Trump Account be properly established for an eligible child. As Dylan noted during the webinar, while $1,000 alone may seem modest, the intent of the program is to encourage early participation over a long time horizon.
Withdrawal Limitations and Tax Considerations
Unlike 529 plans, Trump Accounts are not education specific. Instead, they are designed to introduce children to investing early and are structured to support long‑term investing, with different rules applying once the child reaches adulthood.
Importantly, funds used before age 59½ may be subject to ordinary income taxes and potential early‑withdrawal penalties, similar to traditional retirement account rules, unless an exception applies. As a result, Trump Accounts are generally not designed for near‑term spending needs and may be less suitable for goals that require liquidity earlier in life.
These tax implications underscore why Trump Accounts are often discussed as a long‑term planning tool, rather than a flexible savings account. Understanding how and when funds can be accessed—and the potential tax impact of doing so—is a critical part of evaluating whether this account type fits within a broader family strategy.
Regulatory Evolution and Ongoing Oversight
As Dylan emphasized in the webinar, Trump Accounts remain subject to evolving regulatory guidance from the U.S. Department of the Treasury and the Internal Revenue Service, making professional oversight and periodic review especially important. As with any new savings vehicle, understanding eligibility requirements and ongoing rules is essential.
A Layered Approach: Combining Accounts for Flexibility
Howe & Rusling’s Kids’ Savings & Investment Account Comparison describes multiple account types commonly used when saving for children, outlining how each differs in purpose, structure, and limitations rather than presenting a single account as a universal solution.
This layered approach recognizes that different accounts are designed to solve different problems. Education specific tools may be paired with longer-term investment vehicles, allowing families to address multiple goals simultaneously while maintaining flexibility.
This philosophy is reflected in my own planning. Our second child, was just born in early August, and we plan to open both:
- A 529 plan, to earmark assets for potential education expenses
- A Trump Account, to provide long‑term investment exposure beyond education and take advantage of the government-provided seed money
The goal isn’t to predict his future or define how these funds will ultimately be used. Instead, it is to preserve flexibility so future decisions can be made with more information, more time, and more options.
Final Thoughts
Saving for kids and grandkids is about more than maximizing returns or selecting the most tax efficient account. It involves intentional planning, adaptability, and thoughtful consideration of how different financial tools align with a family’s values, priorities, and time horizons.
As reflected across Howe & Rusling’s educational articles, videos, and webinars, taking the time to understand available options—and revisiting decisions as circumstances change—can help families approach these choices with greater clarity and perspective.
Starting early does not determine a child’s future or outcomes. Rather, it provides an opportunity to begin planning thoughtfully and create flexibility that may support a wide range of possibilities over time.
Disclosures: This material is provided for informational and educational purposes only and should not be construed as investment, tax, legal, or accounting advice. The information presented is general in nature and may not be applicable to your individual circumstances. Readers should consult with their financial, tax, and legal professionals before implementing any planning strategy. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results, and no investment strategy can guarantee a profit or protect against loss. References to 529 plans, custodial accounts (UGMA/UTMA), Trump Accounts, or other savings vehicles are intended solely to provide educational information. Eligibility requirements, contribution limits, tax treatment, withdrawal provisions, penalties, and other features are subject to change and may vary based on individual circumstances. Investors should carefully review applicable plan documents and consult qualified professionals before making decisions. Information regarding Trump Accounts is based on current legislation, publicly available guidance, and interpretations available at the time of publication. Because regulatory guidance continues to evolve, future rules, requirements, restrictions, and tax treatment may differ from those described herein. Any discussion of tax benefits or tax considerations is general in nature. Howe & Rusling does not provide tax or legal advice. Tax laws are subject to change, and their application may vary based on individual circumstances. Any personal examples, experiences, or planning decisions described by the author are provided solely for illustrative purposes and are not intended as recommendations or endorsements of any specific strategy or account type. Individual circumstances, objectives, and financial situations differ. Third-party sources referenced in this article, including Investor.gov, the Internal Revenue Service (IRS), the U.S. Department of the Treasury, and the College Savings Plan Network, are believed to be reliable; however, Howe & Rusling makes no representation regarding the accuracy or completeness of information obtained from third-party sources. Howe & Rusling, Inc. is an SEC-registered investment adviser. Registration with the SEC does not imply a certain level of skill or training. Additional information about Howe & Rusling, including its Form ADV Part 2A, is available upon request or at www.adviserinfo.sec.gov.
