To Isaac & Evan--this ones for you
I know that feeling. The pit in your stomach when the rent is due and the math isn't quite mathing. The quiet panic of a car payment landing the same week as something unexpected. I've lived it, and I've had my own ups and downs with money because of it.
That feeling is exactly why I care so much about this topic. Because the truth is, most of us never got a head start — nobody sat us down and handed us a plan. We figured it out the hard way, if we figured it out at all. And the one thing I know for certain is this: the biggest gift you can give your kids isn't a big check when they turn 18. It's time. Specifically, time for a small amount of money to grow quietly in the background while they're growing up, so that pit-in-your-stomach feeling never has to be theirs. Ever.
Because here's the real goal. It's not about making your kid rich. It's about making sure that when they're 22 and deciding what to do with their life, they're not choosing a job because it pays the rent. They're choosing it because they actually want it. That kind of freedom doesn't come from luck — it comes from a plan you start when they're small.
You don't need a lot of money to start. You need consistency and time. Here's how.
The Four Accounts Worth Knowing About
1. The 529 Plan — "For School"
A 529 is a tax-advantaged account built specifically for education. Money grows tax-free, and withdrawals are tax-free too, as long as they're used for qualifying education costs — college, trade school, even some K-12 tuition. Anyone can contribute: grandparents, aunts, family friends at a birthday party instead of another toy.
The catch: if the money isn't used for education, you'll owe taxes and a penalty on the earnings. (There's now a limited option to roll unused 529 funds into a Roth IRA for the beneficiary, which softens that risk somewhat.)
Best for: parents who are fairly confident their kid will pursue some form of higher education or training.
2. The Custodial Account (UTMA/UGMA) — "For Anything"
This is the flexible bucket. No restrictions on what the money is eventually used for — a car, a security deposit, starting a business, anything. You manage it until your child reaches the age of majority in your state (usually 18 or 21, sometimes later), at which point it legally becomes theirs, no strings attached.
Best for: the "just in case life happens" fund — or for parents who don't want to lock money into an education-only account. I love school but School isn't for everyone!
3. The Custodial Roth IRA — "For the Long Game"
This one is the sleeper hit. If your child has any earned income — a summer job, babysitting, content creation, mowing lawns — you can open a Roth IRA in their name and contribute up to what they earned. It grows completely tax-free, and because they're starting decades earlier than most adults do, the compounding has enormous runway.
A single $3,000 contribution made when your teenager is 16, left untouched, could realistically be worth well over $100,000 by the time they're in their 60s — tax-free. That's the power of starting 40-plus years early instead of 10.
Best for: the moment your kid gets their first paycheck. Match it, or help them contribute part of it.
4. High-Yield Savings & CDs — "The Safety Net"
Not going to build serious wealth on their own, but they're safe, FDIC-insured, and a good place to park money you don't want exposed to market swings — especially money earmarked for something coming up soon, like a first car.
And Now, Something New: Teen Brokerage Accounts
Charles Schwab recently launched the Schwab Teen Investor Account, available to kids ages 13 to 17. It's a joint account — your teen and you own it together — and it comes with no minimum deposit, no trading commissions, and no account fees. Your teen gets their own login, their own debit card (with your approval), and access to real investing education while you supervise everything happening behind the scenes.
This isn't really about the money at 13. It's about your kid watching a real dollar move in a real account, learning what a stock actually is, before they're making financial decisions completely on their own at 18. Most of us never got that. Our kids can. We can break the cycle.
What Small, Consistent Money Actually Does Over Time
This is the part that surprises people, and it's worth slowing down on, because it's the entire engine behind this whole plan: compound growth. In simple terms, compounding means your money earns returns, and then those returns start earning returns of their own. Nothing dramatic happens in year one or two. The curve looks almost flat at first. But stretch it across 15 or 18 years, and the back half of that timeline does more work than the front half ever could. That's why age is the real advantage here — not income.
Assuming a long-term average market return (historically in the 7–10% range annually for a diversified stock index fund, though never guaranteed, and real-world returns will vary year to year):
A single $1,000 deposit at birth, left alone for 18 years → roughly $3,400–$5,000
$50 a month from birth to 18 (about $10,800 total contributed) → roughly $20,000–$24,000
$1,000 a year from birth to 18 ($18,000 total contributed) → roughly $34,000–$41,000
$100 a month from birth to 18, then left untouched for another 10 years (about $21,600 total contributed) → could realistically grow past $60,000–$75,000 by the time your kid is 28, simply from the extra decade of compounding after you stop contributing
Notice what's doing the heavy lifting in that last example — it isn't more money going in, it's more time left in the market. That's the lesson worth sitting with: a modest monthly amount started at birth will almost always outperform a much larger amount started at 10 or 12, because compounding rewards the number of years far more than it rewards the size of any single contribution.
It's also worth being honest about the other side of the ledger: inflation. A dollar 18 years from now won't buy what it buys today. That's part of why these accounts are invested rather than just stashed in cash — the goal of putting this money into index or target-date funds, rather than a plain savings account, is to grow faster than inflation erodes it, not just to watch a number get bigger on paper.
None of this requires you to be wealthy. It requires you to start, automate it if you can (even $25 or $50 a month on autopilot adds up), and then leave it alone.
The Simple Structure
If you're wondering where to actually begin, here's a straightforward way to think about it:
529 → the school fund
Custodial account or high-yield savings → the "for anything" fund — first car, first apartment, emergencies
Custodial Roth IRA → opened the moment they have earned income — the long-term wealth builder
Schwab Teen account at 13 → not for the money, but for the education
The Real Point
We don't set our kids up to fail on purpose — we just don't always know what tools exist, or we assume we need more money than we actually do. You don't. You need time, consistency, and a willingness to keep it boring: low-risk index funds or target-date funds, not speculative bets.
Do this, and by the time your kid is deciding what they want to do with their life, they won't be deciding based on what pays the bills. They'll be deciding based on what they actually want. That's the whole point.
So start today. Even one account, funded with one small deposit, is a start. And if you're not sure where to begin — which account fits your family, how to actually open one, what order to do it in — you don't have to figure it out alone. Reach out and I'll help you build the plan.
And whatever you do, don't let your money sleep in a savings account. Let it work while your kids grow up.
