This post is part of Back-to-School Week at the Center for Economic Opportunity. Each day, we feature commentary and analysis on affordability and other issues for families preparing for the new school year.
As parents prepare to send their children to school, preschool, or start day care, it’s easy to focus on shopping for clothes, backpacks, and school supplies.
The good news is that prices have fallen on school staples. Plus, as my colleague Anna Teply wrote earlier this week, tax-free holidays can make those trips a little more affordable, and prices have come down from recent highs.
Families should also take this time to assess their children’s financial futures and get schooled up on the tools available to save for K-12 education, college and career, entrepreneurship, and adulthood.
Recent federal legislation has made investing in children’s futures easier and their prospects for financial security brighter.
Kids’ Financial Checklist
Here are three financial tools to consider for your child.
- 529 Plan – Tax-advantaged investment account that gives parents the flexibility to save and pay for educational expenses over time.
- Available to all kids 18 and under.
- No minimums required to open one.
- Funds can be withdrawn without income tax when used for education.
- Qualified education expenses include: K-12 education expenses, college tuition and room and board, vocational school, registered apprenticeships, and even student loan payments.
- Changes in the 2025 Working Families Tax Cuts (i.e., One Big Beautiful Bill) increased K-12 education expenses to $20,000 per year in 2026.
- Many state 529 plans offer a state income tax deduction for contributions made by in-state residents.
- Anyone can contribute to them with no annual contribution limits.
- Trump Account – Tax-advantaged investment accounts designed to help families save for children’s futures early in life. Created by the 2025 Working Families Tax Cuts (i.e., One Big Beautiful Bill), the funds are invested in the market and grow tax-deferred.
- Available to all kids 18 and under.
- Babies born between 2025 and 2028 receive a $1,000 federal grant.
- Children born before 2025 and up to age 10 in eligible ZIP codes receive a $250 Dell Foundation charitable gift.
- Parents, relatives, parents’ employers, and charitable organizations can contribute to them.
- Funds cannot be touched until age 18.
- At 18, kids can use the funds for college education, skills training, buying a home, or saving them for retirement.
- Easy to open, but requires a valid Social Security number for the child and adult opening the account.
- No minimums required to open.
Read our how-to-guide here.
- Piggy Bank – Teach kids about saving money they earn or receive through old-fashioned physical piggy banks. For those who don’t receive cash, digital piggy banks can be helpful.
There are other financial vehicles, but these are three easy ones to open and start with.
(Note: We are not financial experts and encourage people to do their homework and/or contact a financial advisor for their unique situation.)
Good Tax Policy Helps Parents Save for the Future
Raising children can be expensive. As parents grapple with day-to-day costs, they may easily feel overwhelmed about how to set aside money for their children’s future. To encourage and empower families, policymakers have created investment tools like 529 plans.
Over time, Congress and states have expanded 529 plans to be more flexible to the varying educational needs of children. Changes in the OBBBA last year expanded qualifying K-12 expenses beyond private school tuition to curriculum and curricular materials, books and instructional materials, online educational materials, tutoring fees, standardized tests, dual enrollment in higher education, and even educational therapies. These are important tools for homeschooling families, students with disabilities, and others.
Trump Accounts are the new kid in class. They aim to help children build long-term wealth, not just meet short-term K-12 and higher-education needs. Because they are open to all children and can be contributed to by virtually anyone, these funds give millions of children from all walks of life access to the stock market and ownership in American companies.
Some 6.5 million families have signed up to date, and dozens of employers have added Trump Accounts as benefits for employees, as our friends at Americans for Tax Reform have catalogued.
Bottom Line
Financial tools for saving and investing can make saving for a child’s future more fruitful and less daunting. As children head back to school, parents can send them with new tools for success.