Finder makes money from featured partners, but editorial opinions are our own. Advertiser disclosure

7 Ways to Save and Invest for a Kid’s Future


It’s never too early for parents to teach kids about money and set them up for success. You can save and invest money for kids or help open their own accounts exclusively designed for them.

Here are seven of the best financial accounts and products that improve kids’ financial literacy and future security.

1. Use a kids’ banking app

Banking apps are some of the most innovative financial products for individuals of all ages. They typically come with a prepaid card, allowing you only to spend funds loaded on the card. Plus, some kids’ banking apps pay interest on balances.

Parents can set a card’s spending limit and restrict merchants where it can get spent locally and online. They can also create chores for kids and automate their allowance payments.

Greenlight is a popular banking app for kids ages 9 to 14 that costs from $4.99 to $14.98 per month. It includes many helpful features like interactive financial education games and quizzes, prepaid cards for up to five children, safety protections, and up to 5% rewards on balances up to $5,000.

2. Use a kids’ checking account

Since most financial institutions don’t offer products for children under 18, a kids’ bank account is typically co-owned by a parent or legal guardian. They come with the same features as an “adult” checking, such as a free debit card and meager interest earnings.

However, kids’ checking has fewer parental controls and financial literacy tools than banking apps. So, if your child isn’t careful, they could overdraft the account, causing parents to be on the hook for bank fees.

3. Use a kids’ savings account

Like the checking account, a kids’ savings is a joint account that a parent or legal guardian owns with a child. For example, Capital One Kids Savings is free, available for children of any age, has no minimum balance requirement and pays interest. Kids and parents can set and track savings goals, create recurring savings deposits and remotely deposit paper checks.

4. Contribute to a 529 college savings plan

A tax-advantaged 529 college savings plan is an excellent account for future education expenses. There are no income limits, and most offer high annual contribution limits, such as over six figures. You make contributions and choose investments from a menu of options, like mutual funds.

Qualified expenses are tax-free, including tuition, fees, books, equipment, and room and board. You can also spend up to $10,000 per year tax-free on elementary and secondary school expenses. That allows parents to withdraw funds for tuition and other education expenses for a younger child attending a public, private or religious school.

5. Contribute to a Roth IRA (individual retirement account)

A little-known benefit of an IRA is that kids can have them, too. You may see an IRA for a minor called a custodial or guardian IRA. It must be in your child’s name (and can’t be owned jointly), but you or another adult will manage it until the child reaches the age of majority.

The primary IRS rule you must follow is that minors can only have their own IRA if they have allowable earned income, such as wages, tips, self-employment income, or taxable college scholarships, grants or fellowships. So, they’re typically only available for teens with part-time jobs.

For 2023, the IRA contribution limit is allowable earnings up to $6,500. For example, if your teenager babysits and earns $5,000, they can contribute up to $5,000 in an IRA for the tax year.

With a Roth IRA, contributions get taxed up front, but withdrawals in retirement are entirely tax-free. That allows your child to avoid paying taxes on decades of growth in the account, which is a fantastic benefit!

Plus, after five years, you can withdraw previously taxed contributions (but not the untaxed earnings portion) before the official retirement age of 59.5 without paying taxes or an early withdrawal penalty. That flexibility means you or your child can use a Roth IRA for any purpose, such as buying a car or going to college.
6. Create a custodial account

Parents can create a custodial account known as a UGMA (Uniform Gift to Minors Act) or UTMA (Uniform Transfer to Minors Act) at most banks and brokerage firms. They allow investments to get held in the care of an account custodian. When a child becomes an adult (usually 18 or 21, depending on your state), the trust assets automatically transfer into the child’s name.

The main benefit of using a UGMA or UTMA account is giving a child as much money or as many assets as you like. There are no annual limits, and you can withdraw funds at any time and for any reason. A portion of the account’s investment earnings gets taxed at your child’s income tax rate, which can reduce taxes.

7. Buy life insurance

An often-overlooked way to protect a child’s financial future is buying life insurance. It gives minor children (or other dependents) financial security after the policyholder’s death.

For instance, term life coverage pays a cash benefit if you die within a period, such as 10 or 20 years. A permanent life policy applies no matter when you die and typically accumulates a cash value.

The downside of life insurance is that it typically doesn’t provide a benefit until the policyholder dies. However, if you have a permanent policy that builds enough value over time, you could tap it to pay any expenses you wish for a child.

Using the best financial products to save and invest for kids is a wise way to help them create a solid financial foundation, limit education debt, and be prepared for emergencies. By starting early, you can prepare your family for future expenses and give your child a financial head start.

Ask a Question provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Go to site