Savings Accounts for Children
The account you choose decides who controls the money at eighteen, and how financial aid treats it.
At a glance
Figures checked 1 Sep 2026
Contribution limit
Custodial Roth IRA limited to the child's earned income, up to $7,500 in 2026
Protection
Bank accounts FDIC insured to $250,000
Tax treatment
Custodial account income above thresholds may be taxed at the parent's rate
What to take away
- UTMA and UGMA assets become the child's outright at the age of majority.
- A custodial Roth IRA requires the child to have genuine earned income.
- 529 assets are assessed more favourably than custodial assets for federal aid.
| Account | Control at 18/21 | Best for |
|---|---|---|
| Minor savings account | Joint with parent | Teaching saving habits |
| UTMA / UGMA custodial | Transfers to the child | General gifting with no use restriction |
| 529 plan | Stays with the owner | Education costs |
| Custodial Roth IRA | Transfers to the child | A child with real earned income |
A custodial Roth IRA is the most powerful of these when it applies. A teenager earning from a summer job who contributes even a few thousand dollars gives that money five decades of untaxed compounding.
Earned income must be genuine and documented. Paying a child a notional wage for household chores does not qualify.
Common questions
Assets held in the student's name, including custodial accounts, are assessed more heavily than parental assets. A parent-owned 529 is treated more favourably.