Rising costs make “I should save for my kid” feel urgent but vague. In the U.S., it now costs around $310,605 to raise a child to age 18—before you even consider college (Brookings Institution). No wonder parents search for the best way to save money for kids and feel overwhelmed by 529 plans, custodial accounts, and endless bank offers.

This guide turns that stress into a clear, practical roadmap. You’ll see how to match your goals (college, first car, long-term wealth) to the right accounts, understand basic tax and financial aid rules in plain English, and get specific examples of how much to save. You’ll also see how everyday tools like cashback and allowance can quietly power the best way to save money for kids over time.

Key Takeaways

• The best way to save money for kids is usually a mix: one account rarely covers every goal.
• Start with your own financial safety, then pick kids’ accounts that match clear goals and timelines.
• 529 plans, high-yield savings, custodial accounts, and Roth IRAs for kids each solve different needs.
• Even $50–$100 per month, started early and invested, can grow into a meaningful nest egg.
• Teaching kids about money is part of the best way to save money for kids—not an optional extra.

Turning vague worries into a simple kitchen-table plan makes saving for your kid feel manageable, not overwhelming—and helps them see money as something they can learn to handle.

Step 1

Get Clear on Your Goals and Time Horizon

Before you can decide the best way to save money for kids, you need to know what you’re saving for and when you’ll need the money. Different goals call for very different accounts, risks, and tax rules.

Education: College, Trade School, or K–12

If your main goal is tuition, you’re choosing between education-focused accounts and more flexible options. Ask:

• Do I expect my child to pursue college, trade school, or private K–12?
• Am I comfortable with money being mostly education-only (like a 529), or do I want flexibility?

Education-first families often make a 529 college savings plan their core, then keep some money in a high-yield savings account for flexibility.

General Future Needs: Car, Apartment, Cushion

Maybe the best way to save money for kids in your family is about giving them a strong start at 18–25: a car, first apartment, or emergency buffer. Those goals are usually 5–15 years away and don’t require education-specific accounts.

Here, a custodial brokerage account (UTMA/UGMA) or a regular brokerage account in your name can make sense. You can invest for growth, then shift to safer assets as your child nears adulthood.

Long-Term Wealth or Retirement for Your Child

Some parents want to create serious long-term wealth—money their child might not touch for decades. Custodial Roth IRAs for kids, or emerging government-seeded “kids accounts,” are built for that kind of time horizon.

If your teen has earned income, a Roth IRA for kids can be one of the best ways to save money for kids over 40–50 years, thanks to tax-free growth (IRS rules apply).

Balance Kids’ Savings With Your Own Retirement

Many parents in saving money for kids Reddit threads ask: “Is it selfish to prioritize my retirement?” The honest answer: no.

High-interest debt and underfunded retirement can hurt your whole household later. In many cases, the best way to save money for kids starts with:

1. Paying off high-interest debt.
2. Building a basic emergency fund.
3. Getting at least your employer 401(k) match.

Once those are in place, directing cashback, bonuses, and monthly contributions into kids’ accounts becomes far more sustainable.

Seeing all your options side by side makes it easier to design the right mix of accounts for education, flexibility, and long-term growth.

Step 2

How Much Should You Save for Your Kids?

You don’t need the perfect number to start. The best way to save money for kids is to pick a realistic amount, automate it, and adjust over time. Still, rough targets and examples help you see what’s possible.

Simple Monthly Examples (to Age 18)

These are illustrative only, using steady 7% annual returns (actual returns vary and investing involves risk):

• $50/month from birth → about $21,000 at 18
• $100/month from birth → about $42,000 at 18
• $300/month from birth → about $126,000 at 18

Start at age 8 instead? You get about 10 years, so:

• $100/month from age 8 → roughly $17,000 at 18

Time in the market matters more than finding a perfect product on day one.

“How Much Should I Save for My Child” Rules of Thumb

For college, some planners suggest targeting one-third of projected costs, with the rest from income, scholarships, and loans. That might mean:

• Aiming for $25,000–$75,000 by college, depending on school type and family means.
• Working backward into a monthly number you can realistically afford.

One trick similar to the “$27.39 rule” is to break big goals into daily amounts. For example, saving $100/month is about $3.30 per day—often easier to picture than the monthly total.

What If You Can Only Save a Little?

Even small, consistent amounts matter. Redirecting $50/month of cashback or small cutbacks into a high-yield savings account or 529 plan still adds up to $600/year, or $6,000 over a decade—before any growth.

The best way to save money for kids is not waiting until you can do $500/month, but starting with what you can do this month and increasing when life allows.

Step 3

Compare the Best Way to Save Money for Kids Options

Before deep-diving into each account, it helps to see the main choices at a glance. This quick table compares popular options by goal, tax treatment, and flexibility.

High-Level Comparison of Kids’ Saving Options

\*Approximate financial aid treatment; rules can change and vary by program.

From here, the best way to save money for kids in your family is usually a stack of 2–3 of these, not just one.

Step 4

Short-Term and Flexible Cash Accounts

For very young kids or very near-term goals, the best way to save money for kids often starts with simple, low-risk cash accounts.

Kids’ / Joint High-Yield Savings Accounts

A kids savings account or joint high-yield savings account is ideal for:

• Emergency buffer for your child’s needs.
• Goals within 1–3 years (camp, a bike, school trip).
• Families who want visual, low-volatility progress.

Look for no fees, a competitive APY, and easy online access. Many U.S. banks, credit unions, and fintech apps offer kids savings account options; our Oodlz guide to kids’ savings accounts explains what to compare.

You can funnel cashback from platforms like Oodlz into this account. Cashback works because retailers share part of their profit when you shop through a link; you still pay the same sticker price. Stack that with a rewards credit card, then move the combined rewards into your child’s savings each month.

Certificates of Deposit (CDs)

CDs let you lock money for a set term (often 6–60 months) in exchange for a fixed rate. They work well when:

• You know roughly when you’ll need the money (e.g., private school tuition in 3 years).
• You want more certainty than an investment account but better rates than a standard savings account.

The trade-off: early withdrawals usually come with penalties, so CDs are not for emergency funds.

Money Market Accounts

Money market accounts blend some features of checking and savings. They may offer:

• Slightly higher rates than regular savings.
• Limited check-writing or debit access.

They’re useful if you want to separate “kids money” while still keeping it accessible. As with savings accounts, interest is taxable in the year earned.

Step 5

Best Way to Save Money for Kids Education

For many families, the best way to save money for kids is focused on education. 529 college savings plans and Coverdell ESAs are designed specifically for this.

529 College Savings Plans

A 529 college savings plan offers:

• Tax-free growth for qualified education expenses.
• Potential state income tax deductions or credits on contributions (varies by state).
• The ability to change beneficiaries among family members.

If your child doesn’t go to college, you can:

• Change the beneficiary to a sibling, cousin, or even yourself.
• Use some funds to pay up to $10,000 of student loans (lifetime limit) in some plans.
• Under new SECURE 2.0 rules, roll over some 529 money into a Roth IRA for the beneficiary under certain conditions (Congress/IRS rules apply).
• Withdraw for non-qualified purposes; earnings are taxed plus a 10% penalty, but the original contributions come back tax-free.

529s are usually treated as parent assets for federal financial aid, which is more favorable than student assets (Fidelity; U.S. Department of Education).

Coverdell Education Savings Accounts (ESA)

A Coverdell ESA:

• Allows up to $2,000/year per beneficiary (subject to income limits).
• Can be used for K–12 expenses as well as college.
• Grows tax-free when used for qualified education costs.

Income limits and the low annual cap mean many families pair an ESA with a 529, or skip ESAs if they already use a 529 and don’t have K–12 tuition goals.

Plain Savings vs 529 vs ESA for Education

When education is your top priority, you’re often choosing between pure flexibility and tax advantages. In very simple terms:

The best way to save money for kids education is often: 529 as the core, plus a smaller flexible pot in a high-yield savings account.

Step 6

Flexible “Anything” Money: Custodial and Brokerage Accounts

If you want savings your child can use for anything—a business, travel, a house down payment—the best way to save money for kids may be a custodial or regular brokerage account rather than an education-only plan.

UTMA/UGMA Custodial Brokerage Accounts

A custodial account (UGMA or UTMA) is opened by an adult for a minor. Key points:

• You control the investments until your child reaches your state’s age of majority (often 18 or 21).
• The money legally belongs to the child. At adulthood, they gain full control—no take-backs.
• Unearned income (dividends, interest, capital gains) may be subject to “kiddie tax” rules, where part of the income is taxed at the parents’ rate above certain thresholds (IRS rules apply).
• For financial aid, custodial accounts are usually treated as student assets, which can reduce eligibility more than parent-owned assets.

Custodial accounts can be the best way to save money for kids when you’re comfortable with them taking the reins at 18–21 and want flexibility beyond education.

Brokerage Account in Your Name, Earmarked for Kids

Some parents prefer to keep full control by investing in a regular brokerage account in their own name, while mentally or on paper earmarking it for their child.

Pros:

• You decide if and when to gift the money.
• It usually counts as a parent asset for financial aid.
• Full flexibility on how the money is ultimately used.

Cons:

• All income and gains are taxed at your rates.
• When you gift large amounts, you may need to consider federal gift tax rules (though annual exclusions are generous).

The best way to save money for kids in this category is often a mix: a custodial account for teaching ownership and accountability, plus a parent-owned “backup” that offers more control.

Time and consistency matter more than perfection—small amounts saved steadily can grow alongside your kid, thanks to the quiet power of compounding.

Step 7

Super Long-Term: Roth IRAs and Government-Seeded Accounts

For truly long horizons, the best way to save money for kids can be to set up vehicles that grow for decades.

Custodial Roth IRA for Kids

A custodial Roth IRA for kids is a powerful tool when your child has earned income from:

• A part-time job.
• Babysitting, yard work, or other self-employment (properly documented).
• Family business work, if fairly paid and legitimate.

Contributions:

• Are limited to the child’s earned income for the year, up to the annual Roth IRA cap.
• Grow tax-free, and qualified withdrawals in retirement are tax-free.

Your teen can withdraw contributions (not earnings) without penalty for some needs, but the real power is leaving the money invested. A few thousand dollars contributed in the teens can grow dramatically by age 65, making a Roth IRA one of the best long-term ways to save money for kids.

New Government-Seeded “Kids Accounts”

Some proposals and pilot programs, sometimes called “Trump accounts” in media, aim to:

• Seed accounts for children with an initial government deposit (for example, $1,000).
• Allow additional contributions up to a yearly cap (e.g., $5,000).
• Treat the account like an IRA when the child reaches adulthood, encouraging long-term investing (Vanguard).

These programs are evolving and may have strict rules on withdrawals and investment options. The best way to save money for kids using such accounts is to treat them as bonus long-term vehicles, alongside more flexible savings and 529s, and to follow official guidance from sources like Vanguard or the IRS.

Pairing Long-Term Accounts With Other Tools

If your child is a teen with a job, a powerful stack might be:

• Roth IRA (long-term retirement growth).
• 529 (if college is likely).
• High-yield savings for near-term goals.

This combined strategy can be the best way to save money for kids who are already earning and making some of their own financial decisions.

Inviting your teen into real account decisions turns saving from something you do for them into a future they actively help build.

Step 8

Age-Based Roadmap for Money Skills and Accounts

The best way to save money for kids isn’t just about accounts—it’s also about habits. Research suggests money habits can form by about age 7 (Cambridge University), and 93% of U.S. parents say they already try to teach kids about saving (NerdWallet).

Ages 0–5: Parents Build the Foundation

Focus on your habits and systems:

• Open a high-yield savings account and/or a 529.
• Automate small monthly contributions, even $25–$50.
• Use clear jars at home labeled “Save,” “Spend,” and “Give” so toddlers see money grow.

At this stage, the best way to save money for kids is mostly invisible to them—but your consistent behavior starts the story.

Ages 6–9: Goals and Visual Progress

Kids can now grasp simple goals:

• Introduce a small allowance tied to age-appropriate expectations.
• Use goal charts (“saving for a $20 toy”) and let them track progress.
• Visit the bank or show your banking app together so they see their kids savings account balance.

Many parents split allowance using versions of the 50/30/20 rule for kids (50% save, 30% spend, 20% give) or three jars. Pick a simple rule and stick with it.

Ages 10–13: Budgeting and Responsibility

Pre-teens can handle more:

• Move from jars to a joint high-yield savings account and, later, a beginner debit card.
• Have them set short-, medium-, and long-term goals.
• Explain interest, investing basics, and why you chose certain accounts as part of the best way to save money for kids in your family.

You can also start talking about how cashback from tools like Oodlz works and let them help decide how to use that “extra” money.

Ages 14–17: Real Income and Investing

Teens often earn real paychecks:

• Encourage part-time work or gig-style jobs.
• Consider a custodial Roth IRA for kids when there is earned income.
• Let them help choose investments (e.g., low-cost index funds) within a custodial or parent-owned brokerage.

By now, the best way to save money for kids is to gradually shift from “for them” to “with them,” inviting them into account reviews and goal-setting.

Step 9

Your 5-Step Action Plan: Best Way to Save Money for Kids

To turn ideas into action, use this simple checklist. You can complete the first version in a single evening.

1. Clarify goals and timelines Decide what matters most: education, flexible launch money at 18–25, or very long-term wealth. Write down 1–2 goals and rough dates.
2. Check your own financial base Prioritize paying off high-interest debt and capturing any employer retirement match. The best way to save money for kids starts with a stable parent.
3. Choose your core accounts Common “stacks” include:
   • 529 + high-yield savings.
   • High-yield savings + custodial brokerage.
   • 529 + Roth IRA (for working teens) + parent-owned brokerage. Our Oodlz overview of kids’ investment options can help you compare in more detail.
4. Automate contributions—then add extras Set up automatic monthly transfers, even if small. Funnel Oodlz cashback and credit card rewards into the same accounts to quietly boost contributions.
5. Review annually with your child Once a year, adjust contributions, rebalance investments if needed, and show age-appropriate details to your child. Over time, this shared review becomes part of the best way to save money for kids and to prepare them to manage that money well.

Next Steps

Disclaimers and When to Get Professional Help

This guide is educational, not personal financial, tax, or legal advice. The best way to save money for kids depends on your income, debt, goals, tax situation, and your child’s likely path. Tax rules for 529s, custodial accounts, Roth IRAs, and government programs change, and financial aid formulas are complex.

For larger contributions, special needs planning, or multiple children, consider talking to a fee-only financial planner or tax professional. They can tailor the best way to save money for kids to your household, coordinate with your own retirement planning, and help you decide how much to use in each type of account. Resources like the Federal Student Aid office, Brookings Institution, and academic work on education savings (Survey of Consumer Finances) can also help you understand broader trends.

Your Strategy

The Best Way to Save Money for Kids in Your Family

Choosing the best way to save money for kids doesn’t mean finding a single perfect product. It means matching clear goals to a practical mix of accounts, contributing steadily, and involving your child as they grow. For one family, the core might be a 529 and a kids savings account; for another, it might be a custodial brokerage plus a Roth IRA for a working teen.

Start with what you can do this month: open one high-yield savings account or 529, automate a small transfer, and direct your Oodlz cashback into it. Over time, layer in other accounts and age-appropriate money lessons. With consistency, even modest amounts can add up, and your child learns that the best way to save money for kids is really the best way to build a confident, financially capable adult.