Compound Interest Makes the Best Baby Shower Gift
Welcoming a new baby into the world comes with all kinds of hopes and dreams. And while you’re busy soaking up the snuggles and adjusting to life with less sleep, it’s also the perfect time to start thinking about their financial future.
Whether you’re a parent, grandparent, or just someone who wants to make a meaningful impact in a child’s life, there are several accounts you can open right now to start building long-term security for the little one you love.
Here are six great options to consider:
1. Custodial Account (UGMA/UTMA)
Custodial accounts let you invest money on a child’s behalf. You can hold everything from stocks and bonds to mutual funds and even real estate. Once the child reaches adulthood (usually 18 or 21, depending on your state), they take full control of the account.
Why it’s a good fit: Lots of flexibility and investment options.
Keep in mind: The money legally becomes the child’s, which may affect financial aid later on.
2. 529 Education Savings Plan
A 529 plan is a popular way to save for education. The money grows tax-free, and withdrawals are tax-free as long as they’re used for qualified education expenses—including college, some K–12 tuition, and even apprenticeship programs.
Why it’s a good fit: Great tax advantages and lots of flexibility for education.
Keep in mind: Non-education withdrawals may be taxed and penalized.
3. High-Yield Savings Account
A high-yield savings account can be a great place to stash birthday money or cash gifts. It’s safe, earns more interest than a typical savings account, and can be opened as a custodial account in your child’s name.
Why it’s a good fit: Simple, secure, and accessible.
Keep in mind: It won’t grow as quickly as an investment account over the long term.
4. Series I Bonds
Issued by the U.S. Treasury, I Bonds offer a combination of fixed interest and inflation protection. You can buy them in a child’s name, and they make a great low-risk savings option—especially during inflationary periods.
Why it’s a good fit: Safe, inflation-protected growth.
Keep in mind: They must be held for at least a year, and early withdrawals come with a small penalty.
5. Certificates of Deposit (CDs)
CDs let you lock in a fixed interest rate for a set period of time. They’re FDIC-insured and great for teaching kids the value of patience and long-term saving.
Why it’s a good fit: Predictable returns with minimal risk.
Keep in mind: Funds are locked up during the term unless you pay an early withdrawal penalty.
6. Trump Accounts
New in 2025, Trump Accounts (created through the One Big Beautiful Bill) are automatically seeded with $1,000 for every baby born between 2025 and 2028. Contributions are limited to $5,000 per year, including up to $2,500 tax-free from a parent’s employer. The funds are invested in low-cost index funds and grow tax-deferred. They become available for things like education, a first home, or starting a business at age 18—and fully unrestricted by age 30.
Why it’s a good fit: An automatic financial head start, with the potential for long-term growth.
Keep in mind: Investment options are limited, early withdrawals have restrictions, and any withdrawals are subject to taxes.
What’s the Best Option for You?
Each of these accounts has its own benefits, and often the best approach is a combination. For example, you might use a 529 to save for education, a custodial account for general investing, and Series I Bonds as a stable backup.
We’re here to help you navigate these choices and build a strategy that fits your goals—and grows alongside your child. If you’re thinking about how to give your little one a strong financial start, we’d love to help. Reach out today for a complimentary consultation. We’ll help you create a plan that sets your family up for success, from the very beginning.
