If there’s one thing every parent, caregiver, or future planner can agree on, it’s this: giving our kids a strong financial foundation is one of the best gifts we can offer. That’s why I’m sharing financial info with Fabric by Gerber Life, a modern financial and life-insurance innovator designed to help families protect their loved ones with ease, affordability, and total peace of mind.
While life insurance helps protect your family today, it’s just as important to think about how you’re helping your children build wealth for tomorrow. Two of the most popular tools families consider are UGMA accounts and Roth IRAs for kids. Although they sound similar, they serve very different purposes—and depending on your goals, one may be a better fit than the other.
Let’s break them down in simple, parent-friendly terms.
What Is a UGMA Account?
(Uniform Gifts to Minors Act)
A UGMA account is a type of custodial account you can open on behalf of a child. Think of it as a flexible investment account that transfers to your child when they reach adulthood.
How UGMA Accounts Work
An adult (often a parent or grandparent) manages the account until the child reaches the age of majority—usually 18 or 21, depending on your state. The money legally belongs to the child. Once they’re old enough, the account becomes theirs to control—no restrictions on how they spend it. Funds can be invested in stocks, bonds, mutual funds, etc.
Pros
Flexible use: The child can use it for education, a car, housing—anything. Easy to open: No job or earned income required for the child. Great for gifting: Ideal for grandparents or family members who want to contribute financially.
Cons
Child gains full control at adulthood: They can spend it however they want—even if that’s not in your vision. Counts as the child’s asset: This can reduce financial aid eligibility. Irrevocable: Once money is in, it belongs to the child. It cannot be taken back.
UGMA accounts are fantastic for parents who want to start early and give their child financial freedom when they become an adult.
What Is a Roth IRA for Kids?
A Roth IRA for kids is one of the most powerful wealth-building tools available—but it does come with a catch:
The child must have earned income.
This means:
Babysitting Lawncare Acting or modeling A part-time job Helping in a parent’s business (with legitimate, documented roles)
How Roth IRAs Work
Contributions are made after taxes—so the money grows tax-free. Withdrawals in retirement are also tax-free. Kids have decades of compound interest ahead of them, making this one of the highest-impact long-term accounts they can have.
Pros
Massive long-term growth potential: Starting young means exponential compounding. Tax-free retirement money: A gift that keeps giving. Flexible early withdrawals: Contributions (not earnings) can be pulled out penalty-free for college, a first home, or emergencies. Doesn’t affect FAFSA like UGMA accounts do.
Cons
Child must have earned income: Without a job, it can’t be opened. Funds are meant for retirement: Less flexible than a UGMA if you want the child to access money at 18.
A child Roth IRA is perfect for families who want to set their kids up for long-term wealth and financial independence.
UGMA vs. Roth IRA: Which Is Better?
There’s no one-size-fits-all answer, but here’s a quick guide:
Final Thoughts: Planning for a Stronger Financial Future
Financial protection isn’t just about today—it’s about building a foundation that supports your family for decades. That’s why I’m thrilled to be partnering with Fabric by Gerber Life, a company that makes life insurance simple, flexible, and completely accessible for busy parents who want security without stress.
Whether you’re considering a UGMA account, a Roth IRA, or a combination of both, the most important step is simply starting early. Small contributions today can grow into meaningful opportunities for your children tomorrow.
If you’re looking to take the next step in protecting your family’s financial future—today and long into the future—Fabric by Gerber Life is an amazing place to begin.
Xoxo,
Heidi
