Make These 7 Investments To Set Your Kids Up For Life

Setting your kids up for life doesn’t mean handing them a fortune or betting on the next hot stock. It means giving them the financial tools and mindset to build a secure, independent future. 

That starts with smart investments. Not just money in the market, but time, education and access to the right accounts to help them grow wealth over time. 

From saving for college to starting a Roth IRA before they can even vote, there are practical ways parents can give their kids a major head start in adulthood — something many Americans wish they had when they were starting out.

We spoke with financial advisors to find out which financial tools and strategies parents should consider. Here’s what they had to say.

1. Fund a 529 plan for their education

College costs are rising, and a 529 plan is one of the most powerful tools available for families who want to save for education. 

These state-sponsored investment accounts allow your contributions to grow tax-deferred, with tax-free withdrawals for qualified education expenses, which include:

• Tuition and fees
• Room and board
• Books, supplies and equipment
• Special needs services and equipment
• Apprenticeship expenses
• Student loans

Many states even offer tax deductions or credits for contributions. 

“If saving for higher education is the primary goal, the 529 plan is a powerful tool,” says Scott Oeth, CFP and principal at Cahill Financial Advisors. “The potential for tax-deferred growth and tax-free withdrawals for qualifying education expenses is hard to beat.”

Beyond traditional four-year universities, 529 funds can be used for trade schools, certain apprenticeships and even K–12 tuition. And thanks to recent changes in federal law, families can now roll up to $35,000 into a Roth IRA for the beneficiary — so the tax advantages won’t go to waste if your child doesn’t need all the money for school.

“With recent tax law changes, the 529 has become far more flexible,” says Melissa Estrada, CFP and founder of Fidela Wealth. “So overall, if the goal is education, I would suggest the 529.”

2. Open a Roth IRA when they start their first job

Once your child earns income — mowing lawns, babysitting, a part-time job — they can open a Roth IRA. Doing so can give them a massive head start. Because Roth contributions are made with after-tax dollars, future withdrawals in retirement are tax-free.

Additionally, contributions (but not earnings) can be withdrawn at any time without penalty, giving your child flexibility as they grow older and their life evolves.

Kevin Feig, CFP and founder of Walk You To Wealth, did exactly this with his two sons. 

“To motivate them to invest even more, we matched their earnings, allowing 100 percent of their income to be invested,” says Feig. “This money was placed into a custodial IRA, which is a Roth IRA for children with earned income. It allows for decades of tax-free growth and, importantly, teaches them financial literacy.”

Even modest contributions can balloon into serious wealth. A teen who puts away $1,000 a year from ages 16 to 22 could be looking at six figures in retirement, thanks to compound growth.

In addition to long-term retirement benefits, Roth IRAs can also support major life goals. For example, the IRS allows first-time homebuyers to withdraw up to $10,000 (can be either contributions or earnings) from a Roth IRA penalty-free. That flexibility, combined with long-term tax savings, makes it one of the most powerful accounts for young people.

“This is probably the single best thing a parent can do for their teen,” says Estrada. “It teaches them to treat savings as a bill, a habit that, if established at this age, can make such a tremendous difference later in life.”

3. Open an ABLE account if they have a disability

If your child has a disability, an ABLE account (Achieving a Better Life Experience) is a tax-advantaged saving and investment account that doesn’t interfere with eligibility for means-tested benefits like Medicaid or SSI.

The tax benefits of an ABLE account are like a Roth IRA, where after-tax dollars go in and the money accumulates tax-free. So long as you spend it on a qualified disability expense, that money remains tax-free.

“Qualified disability expense” is an intentionally broad category that encompasses everything from medical care to housing, education, food, transportation and assistive technology. Anyone can contribute to an ABLE account as well — the account holder, friends, family, even employers. 

This is a massive win for families who want to give their child financial support and independence without jeopardizing crucial government benefits. Not every family can use this tool — your child must be diagnosed with a significant disability prior to age 26 to qualify. 

But for those who meet the requirements, an ABLE account is one of the most powerful options available.

4. Explore ‘Trump accounts’ for babies 

The so-called Trump account, created under the “One Big Beautiful Bill Act,” is a new government-backed investment account for kids. It joins other options like Roth IRAs for kids and 529 college savings plans, but with a narrower design.

Children born between Jan. 1, 2025, and Dec. 31, 2028 will automatically receive a Trump account and a $1,000 government-funded deposit, invested in a stock index fund. No action is required by parents.

Starting in July 2026, parents and employers can begin making contributions. Limits are $5,000 per year from individuals and $2,500 from employers until the child turns 18. After that, annual contributions can go up to the IRA limit ($7,000 as of 2025).

Withdrawals aren’t allowed until age 18. Any distributions taken before age 59 ½ are taxed as income and hit with a 10 percent early withdrawal penalty. 

The Treasury Department will oversee the program, with banks and other financial institutions handling account administration.

However, important account details — like how to access or manage funds — remain unclear. No official Treasury portal or IRS platform has been announced yet. No press release or public guidance from the Treasury (as of early August 2025) confirms how access or contributions will be handled.

The idea behind Trump Accounts is to give kids a head start on investing, using a small amount of government seed money. It could grow into a fund they use later as part of a down payment or to pay for college expenses. If you’re having a child before the end of 2028, it’s essentially free money — so there’s little downside to accepting it.

Still, for most families, Roth IRAs and 529 plans are more powerful tools. They offer better tax benefits, more flexibility, broader investment choices and fewer restrictions.

5. Give them some freedom to manage their own money with an HYSA

Giving kids a chance to manage their own money — whether it’s a cash allowance, a budget for school shopping or their own savings account — helps them learn from experience.

“This teaches them about saving for larger items or toys, the concept of delayed gratification and understanding the cost of items,” says Feig. “I often notice their hesitancy to spend ‘their’ money, which shows they’re learning.”

A high-yield savings account can be a great starter tool. It gives kids a place to store money, watch it grow a little and understand the basics of earning interest — all while keeping things low-risk and accessible.

Real-world practice matters. It helps kids make small mistakes early, when the stakes are low. It also teaches self-discipline, budgeting and the emotional side of spending.

“Providing them with actual cash gives them a tangible experience, which is also valuable,” Feig added.

6. Consider a trust if you’re passing down significant assets

If you’re planning to pass on a business, real estate or a large sum of money, a trust can help structure the distribution and put guardrails on how and when your child can access the assets.

“A trust ensures your wishes are followed, that assets are protected and funds distributed responsibly,” says Estrada. “Without it, an 18-year-old can receive any assets all at once, regardless of his/her maturity.”

If there’s anything you want managed over time — like property or investment accounts — a trust can help protect it from mismanagement or early access. However, the cost and time needed to establish a trust may not be worthwhile for the average family, says Oeth. 

“Creating an irrevocable trust is something that high-net-worth families would consider for estate tax planning, but probably doesn’t make sense for the majority of families,” says Oeth.

7. Invest in educating your kids about growing wealth

No account or strategy can replace the impact of education and open dialogue. Financial literacy isn’t regularly taught in schools, so it often falls on parents to bridge the gap. 

Kids who understand how money works are better equipped to avoid debt, make smart choices and grow wealth over time. And often, those important lessons start at home. 

“In far too many households, money is a taboo topic,” says Feig. “The first step is to normalize it.”

Feig and his wife frequently discuss money in a kid-friendly way, he says. That doesn’t mean burdening your children with financial stress, but instead, discussing things like paying bills, the cost of items and the importance of saving for unexpected events.

It’s not about turning your kid into a mini Warren Buffett. It’s about helping them understand that money is a tool — and one they can learn to use.

Bottom line 

If you want to give your kids a financial head start, don’t delay. Financial literacy and investing for beginners isn’t taught in most schools, so it’s up to parents to fill the gap. The accounts you open matter, but the habits and mindset you help them build matter even more. Start small, stay consistent and give your kids the tools to make smart financial decisions for life.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.