Financial Planning for Parents: Building Wealth for Your Children's Future

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What to Avoid When Planning for Your Child's College Costs

By Michelle Francis, Life Story Financial

Planning for college is one of the most significant financial commitments many parents face. With average costs continuing to rise and financial aid rules growing more complex, it's easy to make mistakes that can cost you thousands of dollars or limit your child's options down the road.

Whether you're just starting to save or your child is already in high school, understanding what NOT to do is just as important as knowing what TO do. This guide will walk you through the most common college planning pitfalls and how to navigate around them with confidence and clarity.

Pitfall #1: Saving Too Much in Your Child's Name

One of the most common mistakes parents make is opening savings or investment accounts directly in their child's name, thinking it shows good financial stewardship or teaches responsibility.

The problem? Assets held in a child's name can significantly reduce financial aid eligibility.

Here's why: the Free Application for Federal Student Aid (FAFSA) assesses student assets at 20%, meaning 20 cents of every dollar in your child's name is expected to go toward college costs each year. By contrast, parent assets are assessed at a maximum of 5.64%.

This means that $10,000 saved in your child's name could reduce aid eligibility by $2,000 per year, while the same amount in a parent-owned account might only reduce it by about $564.

What to do instead: Keep college savings in parent-owned accounts such as 529 plans, Coverdell ESAs, or even your own taxable brokerage account. You maintain control, and the impact on financial aid is much smaller. If your child already has significant assets in their name, consult with a financial advisor about strategies to reposition those funds before filing the FAFSA.

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UGMA and UTMA Accounts: What Parents Need to Know Before Opening One

By Michael Reynolds, CFP®, Elevation Financial

If you're looking for ways to save and invest money for your child's future, you've probably come across UGMA and UTMA accounts. These custodial accounts have been around for decades and remain popular options for parents who want to build wealth for their kids. But popularity doesn't always equal the best choice for your situation.

UGMA and UTMA accounts come with some distinct advantages, but they also have limitations that catch many parents off guard. Before you open one of these accounts, you need to understand exactly how they work and what happens when your child becomes an adult.

Let's break down everything you need to know about these custodial accounts so you can make an informed decision.

What Are UGMA and UTMA Accounts?

UGMA stands for Uniform Gifts to Minors Act, while UTMA stands for Uniform Transfers to Minors Act. Both are types of custodial accounts that allow you to transfer assets to a minor without setting up a formal trust.

These accounts were created to simplify the process of giving financial gifts to children. Before these laws existed, transferring significant assets to minors required creating complex trust structures that came with legal fees and ongoing administrative costs.

Here's how they work in practice.

You open the account as the custodian (usually a parent or grandparent) for the benefit of a minor child. You manage the investments and make decisions about the account until the child reaches the age of majority in your state, which is typically 18 or 21.

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How Trump Accounts Work: A Financial Planner’s Guide for Parents

By Johnson Rhett, CFP®, ChFC®, Branning Wealth Management

You’ve probably heard about “Trump Accounts” by now. On the surface, the idea is fairly simple: the government puts money in an account for your child, it gets invested, and then it grows over time.

But as with most things in the U.S. tax code, the reality is a bit more nuanced. While the prospect of "free money" is exciting, the real question for parents isn't just "how do I get it?" but how does this account fit into the rest of my financial plan? 

So, what exactly are these accounts, how do they work, and most importantly, how should they fit into your overall strategy? Let’s take a look.

Trump Accounts (also known as “530A” accounts) are tax-advantaged, custodial investment accounts built to help children accumulate long-term wealth.

Think of them as a hybrid between a UTMA and an IRA. As a reminder: 

• A UTMA is a custodial investment account that allows an adult to save and invest on behalf of a child, with the assets transferring to the child at adulthood. 

   

• An IRA is a tax-advantaged retirement account designed to help individuals save and invest for retirement while receiving potential tax benefits.

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How Do I Set Up a Retirement or Investment Account for My (Minor) Child?

By Michael Reynolds, CFP®, Elevation Financial

If you have kids, you have probably thought about how to give them a financial head start. The good news is that there are several solid options available to you. The less good news is that they each come with trade-offs, and picking the right one depends on your goals, your child's situation, and how much control you want to maintain over the money.

A lot of parents don't realize that setting up an investment or retirement account for their child is not as simple as setting up an account in the child's name and then contributing money. Minor children under age 18 cannot directly own banking or investment accounts. Because of this, parent-owned accounts or custodial accounts are generally the path to setting aside money for your children.

There is more than one way to do this, but as you might expect, each path has pros and cons.  

The Custodial Roth IRA

A Custodial Roth IRA is, without question, one of the most powerful financial tools available for a child who has earned income. The tax advantages alone make it worth serious consideration.

Here is how it works: a parent or guardian opens and manages the account on behalf of the minor (typically called a custodial Roth IRA). When the child reaches adulthood (typically age 18 or 21, depending on the state), control of the account transfers to them. Contributions are made with after-tax dollars, the money grows completely tax-free, and qualified withdrawals in retirement are also tax-free.

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