How do I best invest for my children's future?

I’ve been thinking a lot about how to invest for my kids. I moved out before my 18th birthday, and my family didn’t help me financially. Growing up in a middle-class neighborhood, I saw many of my friends get help from their parents—whether it was for a first car, college, or a down payment on a house. I want to do the same for my kids but haven’t started investing yet. My wife and I are debating between a 529 plan or just standard investment accounts.

The downside to the 529 is its limited use for education expenses. Both my wife and I have advanced degrees, but who knows what college will cost in 15 years? What if my kids don’t go to college and pursue something else, like starting a business? We’d still want to support them. Given those restrictions, we’re leaning toward standard investment accounts. How are you investing for your kids’ future? Are there other tax-advantaged accounts we should consider?

The best way to invest in your kids’ future is by making sure you’re financially secure first. Prioritize your retirement savings, so you’re not a burden on them later. Then, look into a 529, but only after you’ve maxed out retirement accounts. If you can’t fully fund a college fund, you can always help pay off their student loans over time, spreading out the cost.

More importantly, invest time in them. Play sports, explore hobbies, and travel together. A strong relationship with your kids will pay bigger dividends than any account balance ever could.

@Morgan
I totally agree—secure your retirement first! You can’t pour from an empty cup. Also, investing time in your kids is priceless. Being involved in their activities will shape them far more than just money.

@Zev
Exactly! We’re doing our best to balance both. We have a 6-month-old daughter, and we’re planning to have more kids (IVF, assuming it’s still legal when we’re ready). Spending time with them is more important than stressing over funding everything.

@Morgan
Yeah, that’s a good point. I agree that building relationships and memories is more valuable than just money.

You could also use both a 529 and a UTMA account. I’m putting more into UTMA because I don’t want to overfund the 529. You can also roll up to $35k from a 529 into an IRA for your child.

Zephyr said:
You could also use both a 529 and a UTMA account. I’m putting more into UTMA because I don’t want to overfund the 529. You can also roll up to $35k from a 529 into an IRA for your child.

Same here! I plan to contribute about $40k into the 529, and anything extra goes into other accounts just in case.

If your kids don’t use all of the 529, you can roll the excess into a Roth IRA, which is a great benefit. I highly recommend it if there’s even a slight chance they’ll go to college or trade school. Based on trends, college could cost $400k–$500k by then unless something changes. It’s wild how university endowments keep growing, but tuition rates never seem to stop rising.

Definitely set up a 529. If your kid doesn’t go to college, you can roll up to $35k into an IRA. And if they do go to college, help them get a government job after graduation. They can contribute to a TSP (Thrift Savings Plan) with a 5% match, which will set them up for a great financial future.

I set up 529s for my kids and also opened custodial brokerage accounts. I also got them life insurance that they can take over once they turn 18. For college costs, I used online tuition calculators, which estimate that in-state public college with room and board will be around $150k for my kids (we live in California).

@Quinlan
Thanks! I haven’t used the tuition calculators before. Just curious, do you have both 529s and brokerage accounts for flexibility in case they don’t go to college?

@Quinlan
Exactly! The brokerage accounts give them more flexibility if they decide not to go to college. They’ll have full access when they turn 18.

Here’s a breakdown of your main options:

  • Brokerage account: No legal connection to the child, and you control it. You pay taxes on any gains each year. Flexible but no tax advantages.
  • 529 account: Tax-deferred growth for education expenses. It can be used for more than just college, and you can change the beneficiary if needed. You can roll some into a Roth IRA later if unused.
  • UTMA/UGMA: Irrevocable gifts to the child, taxed as income/gains are earned. The child gets control of the account when they turn 18 or 21.
  • Custodial IRA: If your child has earned income, they can start a Roth IRA early.

Each option has strengths and weaknesses. It’s not always an easy choice, but consider your goals and how much control you want to keep.

@Isle
That’s helpful! I need to learn more about UTMAs since I’m not very familiar with them.

Make sure you and your wife are on solid financial ground first. With stable income and smart spending, you’ll have more flexibility to invest for your kids. Whether it’s a 529 or a brokerage account, having a solid foundation is key.

@Paris
We’re covering our bills and saving for retirement, but with daycare costing us around $2,600 a month for two kids, we only have around $100–$200 a month to set aside for them right now. We know the earlier we start, the better.

Help your kids gain a variety of skills and experiences as they grow. Teach them the basics of budgeting and involve them in learning about investments when they’re old enough. Financial literacy will be one of the most valuable things you can give them.

Teach your kids about investing early. Show them how a custodial Roth IRA works if they start earning income. Help them understand regular contributions to funds like VOO. Just giving them money isn’t enough—financial literacy is the best gift you can give them.

A 529 is a good idea, just don’t worry too much about overfunding it. You can also start a Roth IRA for them when they begin working. Teach them to manage their own money early on so they can become financially independent.

You could also consider permanent life insurance, which builds cash value over time. It’s a bit different from a brokerage account but can offer tax benefits too. It might be worth talking to a life insurance agent if you’re interested.