Investopedia: “5 Expert-Backed Investment Tips for Your Newborn’s Future Beyond the 529 Plan”
January 28, 2026 — In today’s article by Dara Abasi Ita, he explains that if your newborn’s college is already covered, you can improve their financial future by investing in accounts that serve other life goals. For custodial accounts, 20% of the funds are counted for the Free Application for Federal Student Aid (FAFSA) Student Aid Index formula. Only 5.64% of the funds in parent-owned brokerage accounts and 529 plans are counted for the Student Aid Index (FAFSA). And, you could take a hybrid approach by splitting funds between a state 529 for tax benefits and a taxable account for flexibility.
For insights, Dara turns to Marguerita Cheng, CFP® Pro and CEO of Blue Ocean Global Wealth.
Question: When education costs are handled through benefits like the GI Bill, which covers full in-state public tuition plus up to $29,920.95 annually at private schools, the usual 529-first advice stops making sense.
Rita says: Flexibility is key. The real question becomes: how do you build wealth that’s there when your kid needs it—whether that’s at 25 for a first home or at 40 to launch a business—without locking everything behind education-only walls?”
Question: If your child has earned income—even from babysitting, lawn mowing, or modeling gigs—you can open a custodial Roth IRA.
Rita says: The 2026 contribution limit is $7,500 or your child’s total earned income, whichever is less.
Question: What’s the best way to handle a parent-owned brokerage account?
Rita says: If control matters more than tax perks, keep the money in your own name. When the parents open a brokerage account, they have more flexibility and control. You’re assessed at only 5.64% for financial aid purposes. You can also change beneficiaries if circumstances shift. What’s more, the funds in the account stay protected even if your future teenager wants to withdraw funds for something frivolous. The trade-off is that you’re taxed at your income tax rate, not your child’s, so you lose that first $2,700 of preferential treatment. As long as your child has had the IRA account for five years, you can withdraw contributions at any time without tax or penalty. After five years, your kid can withdraw up to $10,000 of earnings for a first home, tax-free.