When Aubrey, a listener of the Marriage Kids and Money Podcast, reached out recently, she asked a fantastic question:

“Hi! My husband and I just had our first baby. Can you make a post/episode on how you would navigate saving for a new baby’s future (potential college, retirement, etc.)? Thanks!”

First off, congratulations Aubrey on your new baby! And bravo for thinking ahead. Most new parents are just trying to get a few hours of sleep, so the fact that you’re already considering your child’s financial future says a lot.

If you’re wondering how to start investing for your newborn, you’re not alone. Many parents want to give their kids a head start but aren’t sure where to begin. Today, we’re walking through five proven steps to help you make smart investments for newborns that build security, opportunity, and generational wealth.

Step 1: Put Your Own Financial Oxygen Mask On First

Before you invest for your baby, make sure you’re on solid financial ground yourself. Pay off high-interest debt, build a 3–6 month emergency fund in a high-yield savings account, and ensure your retirement savings are on track. Ideally, you’re moving toward Coast FIRE so your accounts can grow while you focus on raising your family.

Why this order? Because the best gift you can give your child is financially secure parents who won’t need help later. When your own finances are strong, you’ll be in a better position to invest confidently in your child’s future.

Step 2: Protect Your Family

Protecting your family isn’t just about saving or investing. It’s about having safeguards in place so your loved ones are covered if something unexpected happens.

Get Term Life Insurance for Both Parents

Even if one parent stays home, their contributions have huge financial value. Term life insurance is usually the most affordable way to protect your family’s income during the years your kids depend on you.

Juan from Michigan shared how term life insurance changed everything after his wife died in her 30s. Because she had coverage, he could take time off work, eliminate debt including the mortgage, and start a small business that allowed him to be there for his daughter. Planning ahead protected their family’s future.

Create a Will and Consider a Living Trust

A revocable living trust helps your family avoid or minimize probate. Many families consider one once their assets, including home equity, reach the low six figures. Nicole and I finally set up our plan after far too much procrastination. It was simpler than we feared and the peace of mind was huge. If you’re ready to set yours up, we used Trust & Will.

Freeze Your Credit and Your Child’s Credit

With over a million identity-theft cases reported each year, freezing credit is a fast, free way to block new credit lines in your name. You can unfreeze it anytime if you’re applying for credit.

You can also freeze your child’s credit at any age as long as they have a Social Security number. It takes a bit more paperwork, but it’s one of the best ways to prevent criminals from opening fraudulent accounts in their name. Learn how to do it in this detailed NerdWallet guide to freezing a child’s credit.

Step 3: Open a 529 College Savings Plan

When parents ask about investments for newborns, my top recommendation is usually a 529 plan. These accounts let your money grow tax-free when used for qualified education expenses, including college, trade school, many K-12 costs, and apprenticeship programs. They also count more favorably than other accounts in financial aid calculations.

We opened 529 plans for Zoey and Calvin when they were babies. We started with a lump sum (it was a leaner year for Calvin) and then set up automatic monthly contributions that we stuck with through good and bad markets. Today, those accounts are over $100,000 and growing. By the time they head to college, they’ll have a serious head start on their education.

To learn more about how 529 plans work and how to start one, check out our full guide on 529 College Savings Plans.

Step 4: Add a UTMA or UGMA Custodial Account

A UTMA or UGMA custodial account is another great way to invest for your child. It’s flexible, can hold various investments, and the funds can be used for anything once your child becomes an adult. Growth in these accounts is often taxed at the child’s lower rate.

The tradeoff is that the account weighs more heavily in financial-aid formulas, and once your child reaches the age of majority, the money legally belongs to them. That means they could use it for college, a down payment, or even a wild weekend in Vegas (hopefully not that last one).

Most parents start with a 529 plan first, then add a small UTMA or UGMA later for broader life goals like a first car or a down payment. For a deeper comparison, read our article on UTMA vs. 529. If you’re considering one, check out Vanguard’s guide to UTMA and UGMA accounts.

Step 5: Keep a Custodial Roth IRA on Your Radar

This one doesn’t apply to newborns, but it’s worth planning ahead. A custodial Roth IRA is one of the most powerful investment accounts for kids once they have earned income.

Earned income has to be legitimate and verifiable. Babysitting, lawn care, or other jobs outside your household can qualify, as can real work in your business. Household chores or allowance, however, don’t count. The IRS won’t consider mowing the family lawn or cleaning their room as earned income.

We’ve hired our kids for real work in our family business — co-hosting, content support, and on-camera roles — and contributed their earnings to Roth IRAs. Those balances are already nearing $10,000 each at ages 13 and 11. By the time they head off to college, they may have close to $20,000 invested for retirement. More importantly, they’re learning how money grows with time and the power of compounding.

Investments for Newborns: Putting It All Together

Here’s the simple order of operations for smart investments for newborns:

1. Build your financial foundation first by paying down debt, saving an emergency fund, and investing for your own retirement.
2. Protect your family with life insurance, wills, trusts, and credit freezes.
3. Open a 529 College Savings Plan for tax-free education growth.
4. Add a UTMA or UGMA account for flexibility and non-education goals.
5. When they’re older and earning money, open a custodial Roth IRA for long-term, tax-free growth.

And remember, the most meaningful investments aren’t just financial. They’re the time, love, and knowledge you share with your children. Generational wealth isn’t only about leaving money behind. It’s about teaching your kids how to manage money, build wealth, and create freedom for their future families. That’s the legacy worth investing in.

Want More Family-Focused Financial Strategies?

If you want a step-by-step roadmap that helps you build wealth while keeping your family first, preorder my new book Own Your Time: 10 Financial Steps to Put Your Family First and Escape the Corporate Grind.

P.S. Ready to knock out your estate plan while baby naps? Nicole and I used Trust & Will to get it done. It was faster than we expected, and the peace of mind is worth it.

What are smart investments for newborns that you are considering? Are you interested in building generational wealth for your baby?

Please let us know in the comments below.