I have always felt that the general consensus among the boomer generation was to leave us with trying to figure out our finances and future ourselves. I think there is a huge disconnect between what boomers perceive as the cost of living today and what it actually is.

My unpopular opinion is that my son did not ask to be born. So no, I don’t believe that having him fight for every scrap of money when he comes of age is the right thing to do. I don’t think he needs to do anything to earn my money. It’s my responsibility to set up his future for him and teach him how to be responsible with his investments when the time comes.

I did a lot of research when I decided to open up investment accounts for him. I am no expert. But I do have an MBA from a top university. I used a bit of that knowledge and my own experience with investments to make my choices.

So far, I have opened three different accounts for my son: a 529 college savings account, a UTMA brokerage account, and a kids savings account. Each one has a different purpose.

1. Vanguard 529 College Savings Account

This is his college savings account. I opened it when he was 5 months old. The caveat here was that it did need a large amount to be opened. I opened it with $1,000, which was $200 for each month since he was born. I invest $200 a month.

This may be a lot for some of you, so do not feel obligated to put that much. You should put the amount that works for you and your family.

I went with Vanguard because I wanted the investment options available to me and the ability to choose a more aggressive investing strategy while he is young. I also like the fact that you can send a link to family or friends and they can also contribute for birthdays, Christmas, etc.

To date I have invested $2,600. The account balance as of today is $2,839.72.

If I continue investing $200 a month until his 18th birthday, assuming an average annual return of 7%, he could have approximately $86,600 saved for college. Obviously, investment returns are never guaranteed and the actual amount could be higher or lower.

Hopefully, this will be enough to cover a significant portion of undergrad, housing, supplies, and maybe even leave a little for graduate school if that is what he chooses.

Another thing I like about a 529 is that the money has more flexibility than I originally realized. Qualified withdrawals can be used for things like college tuition, certain room and board expenses, books, supplies, equipment, and other qualified education expenses.

Under current federal rules, there are also circumstances where unused 529 funds can eventually be rolled into a Roth IRA for the beneficiary. There is currently a $35,000 lifetime rollover limit, the 529 generally needs to have been open for at least 15 years, and there are additional rules and annual limits that apply.

One Important Thing About 529 Plans: Your State Matters

Something I think is important to mention is that 529 plans can be different depending on where you live.

The Vanguard 529 College Savings Plan I chose is actually sponsored by Nevada, even though you do not have to live in Nevada to open one.

However, some states offer their residents state income tax deductions, credits, matching programs, or other benefits for contributing to their state’s 529 plan. Some of those benefits may only apply if you use the plan offered by your state.

So before automatically choosing the same 529 that I did, I would compare your state’s plan with other options and see whether you would be giving up any tax benefits.

I live in California, which currently does not offer a state income tax deduction for 529 contributions, so that particular benefit wasn’t something I was giving up by choosing Vanguard’s Nevada-sponsored plan.

2. Vanguard UTMA Brokerage Account

I also wanted to open a brokerage account for my son because I wanted him to have investments that weren’t specifically tied to education.

Again, I went with Vanguard because I liked the investment options available to me. I invest $200 a month into this one as well. I chose the VTI ETF, which gives him broad exposure to the U.S. stock market.

To date I have invested $2,600. The account balance as of today is $2,851.85.

If I continue investing $200 a month until his 18th birthday, assuming an average annual return of 7%, he could have approximately $86,700.

If he then continues investing just $200 a month himself, and the account continues averaging 7%, he could have approximately $362,000 by his 35th birthday.

Obviously, this is only a projection. The stock market does not return 7% every year and there will be good years and bad years.

He can eventually use this money for whatever he wants. Investments, starting a business, buying a house, saving it until he retires. Again, he didn’t ask to be born and if I can give him this cushion for his life I am happy.

UTMA vs UGMA: What’s the Difference?

I saw both UTMA and UGMA accounts when I was researching investment accounts for kids, and they are very similar.

Both are custodial accounts where the assets belong to the child, but an adult manages them while the child is still a minor.

The biggest difference is what you can put into them. UGMA accounts generally hold financial assets like cash, stocks, bonds, and mutual funds. UTMA accounts can hold those things too, but they can also hold a broader range of property.

Another VERY important thing to understand is that money you put into a custodial account is an irrevocable gift to your child. It is legally their money. When the custodianship ends at the applicable age, they gain control of it.

The exact age can vary depending on the state, the type of custodial account, and in some cases how the transfer was established. So I would definitely check the UTMA/UGMA laws in your own state rather than assuming your child automatically gets control at 18 or 21.

That was fine with me because the entire point of this account is for this money to belong to my son.

UTMA vs 529 for Financial Aid

Another consideration is financial aid.

A UTMA or UGMA is considered the child’s asset, while a parent-owned 529 is generally treated as a parental asset for FAFSA purposes. Student assets can have a significantly larger impact on federal financial aid eligibility than parental assets.

This doesn’t mean I wouldn’t use a UTMA. Obviously, I opened one. It was just something I wanted to understand before deciding how much money I wanted to put into each account.

For me, the two accounts serve completely different purposes.

His 529 is primarily education money.

His UTMA is my son’s future money.

3. Capital One Kids Savings Account

My family gave him some cash for his birthday. He’s one LOL. So I thought it was best to put this in an interest-bearing savings account for him.

When he gets older he can use it for whatever he wants. Buy an expensive toy he really wants? Downpayment for a car? Pocket money? Either way this is his money. I am just trying to put it in an account where it can earn some interest instead of sitting around as cash.

Things that I like about this account:

• Specifically designed for children.
• No monthly fees.
• No minimum balance.
• Parent can manage the account easily.
• Great if you’ll be depositing birthday and holiday money over the years.
• It earns interest, although the APY is variable and can change.

I specifically use this account differently from his investment accounts. This isn’t where I’m trying to maximize long-term investment growth. It’s where I’m putting his cash gifts and money that I want to keep easily accessible for him.

Why I Started Investing for My Child So Young

So this is all I have opened for him so far. I don’t know if I will be adding anything as he gets older.

I know $400 a month between a 529 and brokerage account is not realistic for every family. That is not the point of sharing this. $25, $50, or $100 invested consistently over a child’s entire childhood can still add up.

For me, the important thing was simply starting early.

Time is one of the biggest advantages I can give him when it comes to investing. Money invested when he is under one has years and years to potentially grow before he even understands what an investment account is.

But more than anything, I hope that he never has to have serious concerns about money.

I don’t expect to hand him money without teaching him what to do with it. My goal is to teach him about saving, investing, compound growth, and being responsible with money as he grows up.

I just don’t believe financial struggle is a lesson I need to manufacture for him.

He didn’t ask to be born. I chose to bring him into this world. If I have the ability to give him a financial head start in it, I’m going to.

If you have any questions about the accounts I opened for my son, leave them in the comments below and I’ll do my best to answer them. And if you’re doing something completely different for your child, tell me about it! I did A LOT of research before deciding what I wanted to do, but I’m always interested in hearing what other parents chose and why.

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Disclaimer: I am not a financial advisor, and this is not financial, investment, legal, or tax advice. I am simply sharing the accounts and investments I personally chose for my son and the reasoning behind those decisions. Investment returns are not guaranteed, investments can lose value, and tax laws, 529 benefits, UTMA/UGMA rules, financial aid rules, interest rates, and account terms can change. Your state’s rules and tax benefits may also be different from mine. Please research your own state’s rules and consider speaking with a qualified financial or tax professional before making investment decisions.