Saving for Your Children’s Future: It’s About More Than Just Education

When most parents think about saving for their children, college or education savings usually take priority. While education is certainly a critical investment, it’s important to realize that there’s much more to consider when planning for your child’s financial future. From orthodontic care to first cars, helping with a down payment on a house, wedding expenses, or even giving them a head start on retirement savings—there are many milestones that can benefit from thoughtful financial planning.

One way to approach this is by setting up a flexible investment account that can grow alongside your child, giving them a financial cushion as they transition into adulthood. Let’s explore how you can do this and why it might be a better option than focusing solely on education funds.

Key Milestones to Consider

1. Braces and Healthcare Costs

Dental care is expensive, and braces are often a necessary investment for many kids. Costs can easily reach thousands of dollars. Planning for this kind of expense early—whether through a savings account or a healthcare-specific fund—can make sure that when the time comes, the financial burden is easier to manage.

2. First Car

The day your child gets their first car is a memorable one, but it’s also costly. Whether you plan to help with a down payment on a new car or purchase a reliable used one, having a dedicated fund for this can ensure you’re ready when they are.

3. Down Payment on a First Home

With rising housing prices, many young adults struggle to save enough for a down payment. You can help ease this transition by contributing to a down payment fund for your child, giving them a head start toward homeownership.

4. Wedding Expenses

For many families, helping with wedding expenses is another significant goal. The average cost of a wedding continues to rise, and setting aside money early on can allow you to contribute to this big day without stress when the time comes.

5. Early Retirement Planning

Starting early with retirement planning can have a profound impact. If you’re able to help your child establish a retirement fund early on—whether through a Roth IRA or a brokerage account—you’ll give them the gift of time and compounding growth, which is invaluable in wealth-building.

Investment Accounts for Your Child’s Future

Setting up a brokerage account, UTMA (Uniform Transfers to Minors Act), or UGMA (Uniform Gifts to Minors Act) account can be a great way to build savings for your child while maintaining flexibility. These accounts allow you to invest in stocks, bonds, or other securities, letting the funds grow over time.

For us personally, we’ve set up a Joint Investment account, which gives us control over the funds until we believe our daughter is ready to manage them responsibly. At that time, we will gift the funds to her, allowing her to use them for whatever life goals she has. This structure ensures that we aren’t forced to hand over the money when she reaches a specific age but rather when she demonstrates financial maturity.

You can fund these accounts in small, manageable increments. For instance, you might contribute money from holiday gifts or set up a monthly investment, letting it grow steadily over the years. The flexibility of such accounts is key: you can decide when the funds are gifted, and there’s no set timeline for when the child must take control.

The Power of Compound Growth

To give you an idea of how powerful investing can be over time, let’s assume you invest $50 a month into an index fund that tracks the S&P 500, which has averaged around 11.1% over the past 20 years. Here’s how that could grow:

• At age 18: $30,875.66
• At age 30: $122,901.14
• At age 65: $5,102,475.65

These are hypothetical figures based on historical averages and assumptions, and of course, past performance is not an indicator of future returns. However, they do demonstrate the tremendous impact of starting early and letting compound interest work over time.

Conclusion: Flexibility and Control

The beauty of setting up a brokerage or Joint Investment account is the flexibility it offers. You can maintain control over when the funds are passed to your child, use them for major expenses like braces or a wedding, or simply allow the money to grow until they’re ready to take over.

By considering more than just education and thinking broadly about the other financial milestones in your child’s life, you’ll be preparing them for a more secure and successful future. Small, consistent investments today can result in a meaningful financial head start tomorrow.