How to Build a Million-Dollar Future for Your Kids

Setting your child up for life doesn’t require a windfall — just time, consistency and a willingness to think beyond bonds and birthday cards.

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Parents like to tell their children that hard work and ambition will carry them far, and sometimes that’s true. But a well-structured investment account may offer a more reliable path to prosperity than sheer determination.

The simple math involved is deceptively powerful. Let’s say you put $1,000 into an investment account for a newborn today. By retirement age, that kid would end up with well over $1 million if you (or later your child) continue making $100 contributions each month.(1) Even accounting for inflation, that remains a solid return on contributions.

This is no get-rich-quick scheme. Rather, it’s a get-rich-slowly strategy.

“When you do compounding plus automation, that’s the million-dollar ticket,” said Elliot Pepper, a financial planner and director of tax at Northbrook Financial in Baltimore.

Obviously no investment plan comes with guarantees, and there exists a broad menu of account types — including so-called Trump accounts launching in 2026. Below are a few other vehicles that, if used correctly, could give the next generation a sizable financial head start.

Stay Flexible With Custodial Accounts

For parents hoping to seed wealth early, custodial brokerage accounts offer a straightforward solution. Adults open and manage them, but they legally belong to the child, who gains full control upon reaching adulthood.(2) Such accounts go by the inelegant acronyms UGMA or UTMA, short for the Uniform Gifts to Minors Act and Uniform Transfers to Minors Act, named after the legislation that created them.

Advisers say custodial accounts could be useful for families who have more cash to deploy now because the money doesn’t need to be earmarked for education or retirement and can be withdrawn at any point. Most major brokerages — Fidelity, Vanguard or Schwab among them — offer custodial accounts with low fees and easy setup.

That flexibility comes with caveats. Contributions above $19,000 may trigger federal gift-tax obligations(3) and the tax treatment of investment gains is only modestly favorable. As of 2025, the first $1,350 of unearned income is tax-exempt, the next $1,350 is taxed at the child’s rate and anything beyond that is taxed at the parent’s marginal rate. Remember too that funds placed in these accounts are irrevocable, so once your child becomes an adult, you relinquish control over them — regardless of how your kid chooses to spend the funds.

Hedge With a 529

It can be painful to build wealth only to watch that money vanish into a four-year tuition bill. One in six adult Americans currently has federal student loan debt, totaling more than $1.6 trillion in 2025. Mark Kantrowitz, author of How to Appeal for More College Financial Aid, said parents “have a tendency to underestimate eligibility for need-based aid and overestimate eligibility for merit-based aid.” In other words, that full-ride academic scholarship may be more fantasy than fallback plan.

This is where tax-advantaged(4) educational savings accounts come into play. Created in 1996 and available in nearly every state,(5) these education-focused investment accounts offer tax-deferred growth, tax-free withdrawals for qualified educational expenses and, in many cases, state-level tax deductions on contributions.

Opening a 529 plan is straightforward and there’s no cap on how many you can establish for a child. In 2025, individuals such as parents or grandparents (6)can contribute up to $19,000 annually without triggering federal gift tax rules, or $38,000 for couples. For those looking to frontload, the IRS allows a five-year “superfund” of up to $95,000. As ever, compounding rewards the early: the sooner the account is funded, the greater its growth potential.

Skeptics will note the obvious: No one knows what higher education will cost in 2045 or whether it will exist in anything resembling its current form. That uncertainty is exactly why advisers like Northbrook’s Pepper recommend a 529 as only one piece of your overall investing puzzle. Another bonus? Money that’s not used on school can be rolled over into a Roth IRA up to a certain amount without incurring penalties.(7)

Encourage Long-Term Thinking With a Roth

Not every child will go to college, but nearly all of them will want to stop working by the time they qualify for retirement benefits, if not sooner. That’s where the Custodial Roth IRA comes in — a retirement account that’s available to minors with earned income.

These accounts are opened by an adult, funded by the kid’s earned income and taxed like a standard Roth. Earnings grow tax-free and just like in a regular Roth, withdrawals in retirement are untaxed. There’s no age requirement to open one, but the income must be real or you could face an IRS audit. Babysitting, part-time retail or even lifeguarding? Yes. A generous “salary” for doing chores or simply existing? Not so much.

As of 2025, the contribution cap is the lesser of $7,000 or the child’s total earned income for the year. The money doesn’t have to come straight out of a child’s earnings, and parents can contribute, as long as it’s within those restrictions. Take a child who makes $3,000 in a year but wants to spend $1,500 of it. A parent could step in and fund the remaining $1,500.

And while the idea of children saving for retirement may sound aspirational, some advisers take a more pragmatic view. Judy Brown of SC&H Wealth in Washington, DC, recommends incentivizing saving by implementing a junior version of “employer matching”: If your child contributes earnings to an account and you are sufficiently flush, you could pay them the same amount in cash so they get started investing but also feel the immediate benefits of having a salary.

Keep Control With Trusts

Long associated with dynastic wealth, trusts can feel out-of-reach for the average parent. But for those who want control over a child’s financial future, advisers say trusts play a helpful role.

These tools aren’t investment accounts per se, but legal arrangements spelling out who gets what money, when and for what purpose. Lara Sass, managing attorney at Lara Sass & Associates in New York City, said she recommends one type in particular: The Crummey trust, named for a 1968 case that makes gifts to a trust eligible for the annual tax break.

“The Crummey trust is one of the few that is able to receive that annual exclusion” of $19,000 from the gift tax, Sass said. “The nice thing about the Crummey trust is that those assets can really be used for any purpose whatsoever.”

Those assets aren’t limited to cash; they can include stocks, bonds, mutual funds, real estate or even an interest in a private business. They have the added benefit of asset protection, so funds are shielded from the likes of creditors, predators, and even divorcing spouses. Setting up a trust is a complicated endeavor. Attorneys’ fees can run several thousand dollars and maintenance isn’t always turnkey, so you’ll want to hire a trusted lawyer to handle the specifics.(8) But for families with the means — or a strong desire to keep future 18-year-olds from accessing five-figure lump sums — the price may be a small one to pay for discretion and control.

Remember to Diversify

Just like with adult portfolios, whichever accounts you open for your kid will depend on your objectives, said Jonathan Shenkman, president of ParkBridge Wealth Management. A UTMA or UGMA might make sense for parents with lots of spare cash looking to speed up a child’s head start, while a 529 could be the right focus for a family where college is the main goal.

Meanwhile, those Trump accounts that fund investment vehicles for babies are slated to roll out next year and will add to your panoply of options.

“Which account you choose depends entirely on what you’re optimizing for,” Shenkman said. “Some vehicles are built for flexibility, others for tax efficiency and some for control.”

The consensus from advisers is to diversify. Hard work and determination may build character, but nothing beats compounding interest as the real key to accumulating wealth for the next generation.

1. Assuming the market returns roughly 7% a year, adjusted for inflation, as it has since 1980.
2. This can be either 18 or 21, depending on the state.
3. In 2025, the limit you can gift to an individual before incurring gift tax is $19,000, or $38,000 for couples.
4. Kantrowitz said while UGMA/UTMA accounts are considered the student's assets and can significantly reduce financial aid eligibility, 529 accounts are treated as parental assets and have a smaller impact.
5. Wyoming is the only state that doesn’t have a 529 plan, though residents can open a 529 in a different state.
6. Thanks to a change in the FAFSA (Free Application for Federal Student Aid) rules beginning in the 2024-2025 academic year, grandparents can now contribute through 529 plans without jeopardizing a student’s financial aid, removing a longstanding disincentive and aligning treatment across account ownership.
7. Starting in 2024, beneficiaries with money left in 529s can roll over the funds to a Roth. The 529 must be at least 15 years old and no account growth from the past five years can be included in the roll over. There’s also a $35,000 lifetime cap for 529 rollovers and you can’t go past the $7,000 a year contribution limit.
8. For example, a lawyer will handle the paperwork, including issuing a ‘Crummey notice’ each time assets are added to a trust. The notice informs beneficiaries of their right to withdraw the funds and sets a deadline before the assets become trust property.