Love it. Start early.

We have a custodial UTMA through Vanguard and a 529 for our 3 year old. Happy with both. We plan to open a savings account in the next few years.

- We live in Pennsylvania so there is a tax deduction for 529 contributions which is nice.

- Our plan with the UTMA is to show that the stock market is not scary and something they can mindlessly copy until they learn more about it. “Look you owned VTI for 18 years. It went down here and started here. Keep contributing and see where it goes”.

- Once she starts making chore money we will setup some type of savings account at the local credit union so she can save, donate, and spend.

You can do a custodial UTMA which is just a brokerage account for minor but be mindful that it counts fully as their asset during financial aid and they get control when 18 or 21 depending on state. But first $1300 of gains or so is tax free as it’s theirs.

529 is tax free growth and current law allows 35k to transfer to Roth IRA after 15 yrs, details there.

or can open your own separate brokerage account for them but still in your name. All gains are taxed at as yours.

I have all three set up for my two kids as I didn’t want the UTMA to grow too large for them but is good for the misc 10-20 birthday gifts and learning about money / saving / investing.

We are doing a 529 for each child, which receives a tax deduction in NY state. Once the balance hits $30k, we will contribute to their “college, starting a business, or whatever” into a brokerage account. My thought is 35k of the 529 can be rolled into a Roth IRA if they don’t go to college or don’t use the 529. I don’t want to overfund the 529 account. I want to have options for their college savings.

For the money they receive from family or earn (cash only) we give them the option to save it in a separate brokerage account. I am the custodian, they are the beneficiary. They make the decision to invest the money in VTI for long term growth or we use the settlement fund as a savings account if they think they want the cash in the next year or two.

My bank let's me set up additional savings accounts, so I created one for each kid and dump grandparent gift money in their for now.

We also have 529s for both kids, but gift/fun money doesn't need to be locked in there while they're that young.

Have you looked into the new Invest America account?

We went through the same thing and ended up just opening another Vanguard brokerage account in our name. Granted our daughter will be 6 and the rules have opened up on 529 uses since then. We still felt it was too restrictive. I loved the argument "but you can re-assign it to someone else." Right, but its [kid's name] money, not someone else's!

Yes, we the parents pay the taxes, but we just consider that part of our contribution. If you want to go that far, you could make a lesson of it and take out more that what is needed to cover the taxes. But if they want to start a business or buy a responsible car, we are not restricted on uses. We also felt 18 was too young to have a small windfall. Ideally they have already learned smart 2nd generation fi lessons by then, but we felt the full transfer should happen a little later than 18.

We saved it in our own high-interst savings account and kept track how much belonged to the kids. Once our kids were older (around 10-12) I opened a joint-investment account (so in my name and theirs) so that they would get monthly statements in the mail and learn how compounding interest works. This has been so effective that our older child likes to some of her allowance to that account because of how it earns money.

What's great is this is a "many options, take 'em all" scenario. Here are some things to consider:

• Start a custodial kids saving account at your bank. You're already banking there, so it's more straightforward, less time with maintenance, etc, and one less institution to check. EG, Capital One has great kid savings and checking, but pretty much any bank will have something. That puts the money in the kiddo's name from the get-go
• For money from grandparents, talk with them about opening a 529 that they own, with kiddo as beneficiary. Check into the program for your state first, since many have tax advantages for state residents. If there's nothing majorly compelling, look at other state programs and see what's a good fit. Grandparents contributing to 529 can be a huge win for kiddo down the line, and grandparents can know they are actively being part of their grandchild's future.
• If you want to start a custodial UTMA, go for it. As kiddo gets old enough to state preferences, you can coordinate on how funds in their name get allocated.

We've got an 11yo and 14yo, and have been working with them on finances since they were little. Each kid got a weekly allowance when they turned 5, and they have a say in how all gifts to them get allocated.

If it were me, I'd likely set up a savings account in the kid's name and have the money go in there. When they were old enough, I'd then talk through what that money is and why it's significant, how people who love kiddo have been setting aside a little something for them from infancy onward.

I'd highly encourage you to take another look at the 529 though, with potentially one that you parents own and can add kiddo as beneficiary as you decide. The down-the-line Roth conversion and the diverse use of funds is a big win, and can have good tax advantages depending on your situation.