You've Made It Financially If You Start This Kind Of Savings

Everyone wants to rise through the economic ranks. The impact of money on the lifestyle you can expect to enjoy is dramatic, and those earning more have more room to save for retirement. But retirement assets are just one aspect of a competent saver's budget. Another sign of healthy financial literacy is establishing savings accounts for your children. Most parents want to give their young ones an even better life than they had, and one crucial way to do this is to start saving money for the little ones as early as possible. The most committed parents start while they're still changing diapers and preparing bottles. The reasoning is grounded in the same logic of early retirement savings contributions: The earlier you start, the more gains you will see.

Utilizing the value of compounding interest helps in many ways, and leveraging this feature to support your financial goals for your children can be a telling sign that you've made it into the "upper class." Unfortunately, over 50% of Americans don't have bank accounts of any kind set up for their minor children, according to a 2020 CNBC + Acorns Invest in You survey. Yet, a Bankrate study from 2024 indicates that 61% of parents sacrifice financially to help support their adult children. These divergent statistics suggest that most Americans don't save for their children early on and end up paying for it in spades later. Pushing savings forward and leveraging the power of time can therefore make a huge difference in both kids' and parents' futures, and it's considerably easier than you might think.

Children are expensive. As of 2025, the cost of raising a single child from birth to 18 was estimated by a LendingTree study to be nearly $300,000, an increase of 25.3% from 2023. There's often little room in the budget to set aside big savings later on to support college needs or other financial goals like buying a first car or moving out. Many parents also want to help their children with the expenses of a wedding — something that costs the average couple $36,000, per Zola.

In much the same way that retirement savings benefit from the decades between your first day at work and last, starting children's savings accounts early is a big deal. Those who have their financial wits about them will notice that small contributions made when their child is still an infant can ultimately balloon with the power of time. You don't even need to invest in aggressive growth options to take advantage of these opportunities. Simply setting a modest contribution aside every month in an index fund or online savings account will do the work for you. If you put just $25 into the S&P 500 every month until your child turns 18 (assuming it maintains its 6.47% inflation-adjusted average annual return), you'll have invested around $5,400 total and essentially doubled the account's value. A $100 monthly investment will grow to over $41,000! That's a serious chunk of change that can transform the options laid out before your child.

The most obvious option available to parents is a custodial savings or brokerage account. These are essentially joint-ownership accounts shared by you and your child. This means that they'll be legitimate owners of the account and its assets rather than having a pool of money set aside that's theirs by promise alone. This can be a great way to transfer financial value to your loved one. When your child starts working, you might also consider sharing account details with them so they can make contributions, too. These kinds of accounts are a great way to save for your child, but they can also be a powerful means of imparting crucial financial literacy.

Parents also have the ability to open a 529 plan account for their children. These are tax-advantaged savings accounts that help pay for college or other educational expenses. There are two types: college savings plans and prepaid tuition plans. The savings plan may be the best choice for many savers, as it allows you to grow a pool of money in investments that can be used to pay for a range of high expenses later. On the other hand, a prepaid tuition plan gives parents the ability to buy college credits at a set price today and cash them in later on when expenses are inevitably much higher. Lastly, for small business owners, hiring your children and opening an IRA or 401(k) is one pathway to begin saving for their future retirement at a young age. They must be below 17 to qualify, and even side gigs like babysitting qualify as income for contributions.