With contributions to Trump Accounts opening July 4th, we believe this is the right time to revisit a question many parents face: What can I do to invest for my child’s future? There is no single right answer, but the decision typically comes down to a key tradeoff: how much control do you want to maintain, and what are you willing to give up to get it?
When we talk about control in this context, we mean two distinct things. First, investment control, what you are actually permitted to invest in. Second, parental authority, how much say you retain over the account itself: who can access the funds, when, and under what conditions. Every vehicle on this list makes a different set of trade-offs across both dimensions. Understanding those trade-offs is the starting point for building a strategy that fits your family.
Below we provide an overview and summary of tradeoffs of four of the primary investment options available to parents today.
Trump Account
One of the newer options available is the Trump Account, a tax-deferred retirement account designed specifically for children under the age of 18 who have a work-authorized Social Security number. These accounts can be opened by a parent, legal guardian, grandparent, or even an adult sibling, making them broadly accessible for families looking to begin long-term savings early. Contributions are flexible in terms of who can contribute, family members, friends, employers, and even the child themselves, but they are subject to an annual limit of $5,000 starting in 2026, with future adjustments for inflation beginning in 2028. Employers may also contribute up to $2,500 per employee, though this amount counts toward the overall $5,000 annual cap and applies per employee rather than per child.
An additional incentive exists for younger children: if a child is born between January 1, 2025 and December 31, 2028, and the account opener qualifies to claim the child for the child tax credit, the federal government will contribute a one-time $1,000 deposit into the account. Importantly, this government contribution does not count toward the annual contribution limit, making it a meaningful early boost to long-term growth.
While the structure encourages early saving, it also comes with strict limitations during what is known as the “growth period,” which lasts until the child turns 18. During this time, no withdrawals are allowed, except in very limited circumstances such as a direct rollover into an ABLE account for a child with a qualifying disability. Investment flexibility is also intentionally limited. Funds must be invested in low-cost exchange-traded funds (ETFs) or mutual funds that track broad market indexes like the S&P 500 or similar U.S.-focused indexes with at least 90% exposure to domestic equities.
Once the child turns 18, these restrictions are lifted, and the account effectively transitions into a traditional IRA. At that point, the account holder gains full control over investment and distribution decisions, subject to traditional IRA rules. In this way, Trump Accounts represent a trade-off between control and structure: families give up short-term flexibility and customization in exchange for disciplined, tax-advantaged growth during the child’s early years, with the goal of establishing a strong financial foundation for adulthood.
Custodial Accounts (UGMA/UTMA)
Custodial accounts, commonly known as UGMA or UTMA accounts, are taxable brokerage accounts established in a child’s name but managed by an adult custodian until the child reaches the age of majority, typically between ages 18 and 25, depending on the state. At that point, full control of the account transfers to the child. The primary distinction between UGMA and UTMA accounts lies in the types of assets they can hold. UGMA accounts are limited to traditional financial assets such as cash and securities, while UTMA accounts offer broader flexibility, allowing for alternative assets like real estate, collectibles, and other forms of property in addition to cash and investments.
One of the key advantages of custodial accounts is the absence of formal contribution limits, allowing families to contribute as much as they wish. However, contributions are still subject to the annual gift tax exclusion, which is $19,000 per individual in 2026. From a tax perspective, these accounts function like standard brokerage accounts, meaning interest, dividends, and capital gains are taxed in the year they are realized. While the income is technically attributed to the child, many families must navigate the “Kiddie Tax,” which applies to certain children based on age, student status, and level of earned income. As of 2026, under these rules, unearned income is taxed in tiers: the first $1,350 (2026) is tax-free, the next $1,350 is taxed at the child’s rate, and any amount above $2,700 is taxed at the parent’s marginal tax rate. This structure provides some tax advantage but limits the ability to fully shift income to a lower tax bracket.
The flexibility of custodial accounts, both in terms of contributions and investment options, comes with an important trade-off: a loss of long-term control. Once the child reaches the age of majority, the assets legally belong to them, and the original contributor cannot impose restrictions, delay access, or dictate how the funds are used. This lack of control can be a concern for families who want to ensure funds are used for specific purposes, such as education. In this way, custodial accounts represent a balance between flexibility and simplicity on one hand, and reduced control on the other.
Custodial Roth IRA
For children who have earned income, a custodial Roth IRA can be a powerful long-term savings tool. Like custodial UGMA and UTMA accounts, these accounts are opened in the child’s name and managed by an adult custodian until the child reaches the age of majority, typically between ages 18 and 25 depending on the state. The key requirement, however, is that the child must have earned income to contribute.
Contributions to a custodial Roth IRA are made with after-tax dollars and are limited to the lesser of the annual Roth IRA contribution limit, $7,500 in 2026, or the total amount of income the child earned during the year. One of the primary advantages of this account is its tax treatment: investments grow tax-free, and qualified withdrawals in retirement are also tax-free. Additionally, contributions (but not earnings) can be withdrawn at any time without taxes or penalties, providing a degree of flexibility. However, earnings withdrawn before age 59½ are generally subject to income tax and a 10% penalty, unless an exception applies, such as for qualified education expenses or a first-time home purchase.
The trade-offs of a custodial Roth IRA center on access and eligibility. On the positive side, the account offers broad investment flexibility, and no required minimum distributions in retirement. It also provides a layer of structural discipline, since the retirement framework limits how and when earnings can be accessed, even after the child assumes control.
The primary limitation, however, is the earned income requirement. Children without wages or self-employment income are not eligible to contribute, which can make this account inaccessible for younger children or those not yet working. While parental control exists during the custodial period, the account ultimately transitions to the child, who gains full ownership. Unlike custodial brokerage accounts, this transition does not result in unrestricted access to a lump sum; instead, the rules of the Roth IRA continue to govern withdrawals, helping preserve the account’s long-term retirement focus. In this way, custodial Roth IRAs strike a balance between flexibility, tax efficiency, and built-in guardrails that encourage disciplined, long-term investing.
529 Plans
For families specifically focused on education savings, 529 plans remain one of the most effective and widely used tools available. These accounts are typically owned and controlled by a parent, which allows them to maintain full authority over how the funds are managed and distributed. Contributions are made with after-tax dollars and are not deductible at the federal level, although many states offer a state income tax deduction or credit. The primary benefit of a 529 plan is its tax treatment: investments grow tax-deferred, and withdrawals are completely tax-free when used for qualified education expenses, including tuition, fees, room and board, and required books.
This strong tax advantage and parental control come with important trade-offs. Funds in a 529 plan are purpose-built for education and using them for non-qualified expenses results in both income taxes on earnings and a 10% penalty. Investment flexibility is also limited compared to a traditional brokerage account, as options are determined by the plan sponsor and typically consist of pre-built portfolios, often structured as age-based allocations that automatically adjust over time. While this simplifies decision-making, it reduces the ability to customize an investment strategy.
Where 529 plans stand out is in the level of control they provide. The account owner retains full authority indefinitely, with no required transfer of ownership to the child at any age. Owners can change the beneficiary to another eligible family member if circumstances change, and they decide if, when, and how distributions are made. Additionally, 529 plans have become increasingly flexible over time, as periodic legislative updates have expanded how these funds can be used. One example is that up to $35,000 of unused funds may be rolled over into a Roth IRA for the beneficiary over their lifetime, provided the beneficiary has earned income and other eligibility requirements are met. These changes reflect a broader trend toward making 529 accounts more adaptable to changing education and financial planning needs.
In this way, 529 plans represent a clear trade-off: families give up flexibility in how the funds can be used and invested in exchange for maximum parental control and highly favorable tax treatment when the goal is education funding.
Putting It Together
When you step back, each of these account types exists along two key dimensions: how much control you retain over the assets, and how much flexibility you have in how those assets are invested and ultimately used. No single option is universally “best”; each represents a different trade-off between control and flexibility.
For most families, the optimal approach is not selecting a single account but thoughtfully combining multiple tools to serve different objectives. A 529 plan may anchor education savings, a custodial Roth IRA can introduce tax-free growth for a working child, and a brokerage or trust structure can provide additional flexibility or long-term control. Used together, these accounts can complement one another, allowing families to balance competing priorities rather than compromise on a single solution.
What matters most, however, is getting started. For young investors, time in the market is the one resource that cannot be recovered once lost
Questions Worth Asking
As you think through the right approach for your family, a few questions can help clarify the path forward:
- How much investment control do you want? Do you want to pick individual securities, or are you comfortable with a curated menu or index-only approach?
- How much parental authority do you need to retain, and for how long? Are you comfortable with assets transferring unconditionally to your child at a fixed age?
- Is education the primary goal, or are you building toward broader financial independence with no restrictions on how funds are used?
- Does your child have earned income today, even from part-time work or self-employment, that would make a Roth IRA contribution worthwhile?
- Is there a case for using multiple vehicles in parallel, and if so, what is the right sequencing given your current cash flow and tax situation?
- These are not one-size-fits-all decisions. The best structure is the one that aligns with your family’s goals, timeline, and circumstances, and that you actually start.
Disclosure
This material is provided by Gryphon Financial Partners, LLC (“Gryphon”) for informational purposes only. It is not intended as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Facts presented have been obtained from sources believed to be reliable, though Gryphon cannot guarantee their accuracy or completeness. Gryphon does not provide tax, accounting, or legal advice. Individuals should seek such guidance from qualified professionals based on their specific circumstances.