Deciding the best way to save for kids

After nearly three decades of marriage, Corey and Olga Sessions are creating a new financial mindset for future generations of their family.

“We had humble beginnings when we got married,” reflects Olga. “We were in our early 20s and didn’t have anything. Corey worked multiple jobs, and we worked hard just to get a start.”

Their real wealth was in their family.

As the Spring, Texas, couple found their financial footing, they knew they wanted life to be different for their four daughters, now grown. That included purchasing life insurance for each child, as well as setting up 529 education savings plans and mutual funds for them.

“We wanted them to see how, while you work for your money, your money also can work for you,” Corey says. “We wanted them to be introduced to the stock market while [they were] young to get them saving early, so it could potentially grow with them.” They also wanted their daughters to learn that, with consistency and discipline, they will have money to cover emergencies or even for retirement.

The Sessions want the same for their three granddaughters.

“It creates a legacy in our family that didn’t previously exist,” Olga says. “I want the girls to know what they have, and to have enough to not only do what they want but also to give and support others, so others can be blessed by them.”

The Sessions chose 529s and mutual funds, but with so many ways to save—from college plans and custodial accounts to retirement accounts—how do families know where to start?

When it comes to saving, there’s no one-size-fits-all solution. But the first step is always the same: Clarify your goals before opening any account.

“Before I can recommend a solution, I need to understand what we’re trying to solve for,” says Joslyne Counselman, Thrivent financial advisor with Financial Synergy Group in Allison Park, Pennsylvania. “How important is flexibility? What trade-offs are you willing to make? Once we understand the goal, then we can find the right vehicle to support it.”

When saving for children, education often isa top priority. But it’s not the only one. Some parents and grandparents, like the Sessions, also want to teach financial responsibility and create a foundation for the next generations, whether that’s long-term financial security, a future home or something else entirely.

While there’s no best way to save, there are a variety of tools, each serving a different purpose, that can help you get started.

A 529 account is often one of the first options families consider when education is a clear priority.

“It is best suited for the family that feels strongly that college is part of the child’s future,” says Janna Hurd, Thrivent market director in Spring, Texas. “The biggest benefit is tax-deferred growth and tax-free withdrawals when the money is used for qualified education expenses.”

Today, the 529 plan can be used for college, trade school and a broader list of K-12 expenses, Hurd says. And if the child you’re saving for won’t need it, you can transfer the plan to an eligible family member. Or, you could later roll up to $35,000 in unused funds into the beneficiary’s Roth IRA.

“While a 529 can be part of the answer, I don’t think it’s the ultimate answer,” Counselman says. “The tradeoff is flexibility. If education plans change, families need to understand the limitations and potential tax consequences for using the funds for nonqualified expenses.”

UGMA (Universal Gift to Minors Act) and UTMA (Uniform Transfers to Minors Act) investment accounts allow parents or grandparents to save money for a child’s future financial needs. The accounts are owned by the child but managed by an adult until the age of majority, which is 18 or 21 depending on state law.

“The biggest thing families need to understand with these accounts is control,” Counselman says. “Once a child reaches the age of majority, that money becomes theirs. Parents and grandparents can’t control how it’s used, even if the savings intentions were good. That surprises a lot of families.”

That flexibility—being able to use the money for anything, not just education—is both the appeal and the caution.

“They can make sense when someone wants to give a true gift—something that belongs to the child,” Hurd says. “But it’s important to be thoughtful, because once it’s theirs, there’s no pulling it back. The gift is irrevocable; you can’t reclaim the assets.”

The custodial Roth IRA offers a unique opportunity for savings if your child or grandchild has earned income.

“This is one of the biggest hidden opportunities for families,” Hurd says. “A Roth IRA for a child is a jewel, and most families don’t even know it’s possible.”

An adult (custodian) opens this tax-advantaged retirement account for the minor with earned income. There’s no minimum age, and the earned income may come from things like part-time jobs, family businesses, babysitting or lawnmowing. You will need documentation of earnings, and there are annual contribution limits, $7,500 in 2026. Because Roth IRAs grow tax-free, starting early can have a significant impact over time. While Roth IRAs are designed for retirement, contributions (not earnings) can be accessed tax- and penalty-free before retirement if needed.

“I love using Roth IRAs as a teaching tool,” Counselman says. “I’ve seen parents say, ‘If you put in $50 a month, I’ll match it.’ That helps kids understand saving, investing and even how employer matches work later in life.”

Trusts have a reputation as things only wealthy people need to consider. However, a trust is simply a legal tool you work with your attorney to create that lets you control how and when your money is passed on.

“Trusts aren’t about having a lot of money,” Hurd says. “They’re about control and protection, especially when there are special needs, complex family situations or concerns about how money will be handled in the future.”

Trusts let both parents and grandparents give with intention—providing support over time instead of a single lump sum that could feel overwhelming. By setting clear guidelines for when and how money can be used, trusts help protect children and grandchildren while still encouraging responsibility, independence and growth. The result is a legacy that supports opportunities and values, not pressure or entitlement.

These accounts, even though they might not offer the growth potential of other savings vehicles, still have a place in financial planning. They can be valuable for short-term goals or even very young children.

“Every account should have a purpose,” Counselman says. “Savings accounts and CDs still matter for short-term needs, safety and accessibility. Not every dollar should be invested aggressively, especially if you’re looking at needing it in the next one to five years.”

Hurd notes that savings accounts also can be an effective teaching tool.

“For young kids, savings accounts help them actually see their money grow, even if it’s just a little,” she says. “It’s today’s version of a piggy bank, and it’s a powerful way to teach the habit of saving.”

These tax-advantaged investments accounts, also known as Trump accounts, are geared toward children under age 18. Created under federal legislation and expected to launch this summer, they are a way to encourage long-term investing from an early age.

The federal government intends to make a one-time $1,000 contribution into the accounts of children born between 2025 and 2028. Family and others may contribute up to $5,000 per year per child.

Because this is a new program, details—including eligibility, contribution limits and tax treatment—were still evolving at the time of print.

Figuring out the right savings vehicle isn’t the only priority for families. “It’s just as important to prepare kids to be financially competent,” says Counselman. “Teaching alongside giving makes a real difference.”

For many Thrivent members, faith plays a central role in teaching stewardship, responsibility, and caring for family and community. “Scripture tells us that a good person leaves an inheritance to their children and their children’s children,” Hurd says, paraphrasing from Proverbs 13:22. “But legacy is about more than money. It’s about values, stewardship and faith.”

Parents and grandparents often share similar hopes and dreams for a child’s future. But their approaches may differ.

“Parents may be balancing current expenses, retirement and their kids, and they prioritize flexibility,” Counselman says. “Grandparents may be thinking more about legacy, intentional gifting and estate planning.”

The key to keeping everyone on the same page is communication, coordination and respect for boundaries.

“The biggest problems I see are when families don’t talk to each other,” Hurd says. “Joint conversations and shared planning help prevent overlap, confusion or unintended outcomes.”

Remember the shared goal: supporting the next generation.

Donna Hein is senior editor of Thrivent Magazine.