Saving for your kids’ future

It requires a healthy dose of cognitive dissonance to choose to become a parent. I don’t think this is a 21st century phenomenon, either. I imagine the mothers who gave birth and raised babies in ancient Roman times, say, or during the plague in 14th century England, or throughout the Nazi occupation of Europe, had to find ways to quiet that part of their brains that worried they were bringing their children into an inhospitable world full of death and disease and destruction.

But once you have that baby, and they start to grow, every single day you feel the indescribable joy and unbearable pain of watching them move on their own through this wonderful and terrible world. I won’t say every parent wishes for their child to have a brighter future, but I do. And even on the grimmest days, when the news is terrible and much of the country is choked with wildfire smoke and suffering through record heatwaves, I have to believe that things will get better.

Of course, the act of parenting is about more than just simply hoping the world will become a more hospitable place, and that good will ultimately triumph over evil. You also have to embrace all the mundane and practical tasks that are required when you’re raising a human: wiping their butts, tending to their bumps and bruises, teaching them the “three Rs,” and generally supporting their development from squirmy blobs to walking, talking phenoms. It’s a big job with no instruction manual.

It also costs a fuck ton of money. And everyone loves to talk about how insane it is to have kids in this economic environment. Getting pregnant is expensive. Child care is expensive. Private school is expensive. Summer camp is expensive. Kids’ sports are expensive. Even family vacation is expensive. When all is said and done, the average family is spending more than $300,000 from birth to age 18 to raise a child in the U.S.

And while we’re all trying to figure out how to pay for the day-to-day, there’s also the question of saving for our childrens’ futures.

On July 4, Trump Accounts launched with a bit of fanfare. These new government-backed custodial accounts are essentially IRAs for kids. Families can save up to $5,000 a year, and the money will be invested in low-cost index funds that track the S&P 500. Children born between 2025 and 2028 qualify for $1,000 in seed money. While the Trump Administration has talked a big game about how these accounts can one day be used to start a business, buy a house, or pay for college, there are many, many rules on how and when the money can be withdrawn. Ideally, those babies born in 2025 won’t touch the money until 2085, when they are 60 years old and ready to retire.

It is mind-boggling to imagine what our world will look like in 60 years. And it’s easy to spiral and think the worst. When you find yourself picturing a future as bleak as Cormac McCarthy’s The Road, it can seem downright silly to set aside thousands of dollars a year that your child can’t tap for decades.

Then there’s the issue of actually having an additional $5,000 to save each year for the far-off future. Much has been made of the affordability crisis we’re facing. Housing prices are astronomical. Crude oil just hit $100 a barrel. Premiums for health insurance bought through the exchange increased 20% last year. The Urban Institute reports that 49% of American families don’t have the resources to cover essential expenses.

And yet, before I pull you even further into my doom spiral, I want to take you back to the top of the essay and ask you to dust off your cognitive dissonance cap and put it back on. Take a deep breath like I just did when I first typed these words, and let’s try to be hopeful for a moment.

Last week, we released an episode of Family Money, the podcast we’re producing in partnership with Babylist, all about Trump Accounts. In the episode, I interviewed economist Kathryn Anne Edwards, whom I’m a little bit obsessed with because she’s both incredibly smart and incredibly optimistic. (She has a podcast called The Optimist Economy.)

We talked a bit about the history of baby bonds and the pros and cons of Trump Accounts. But there was one thing Kathryn Anne said toward the end of our interview that really stuck with me. I asked her, in an ideal world, how would these kinds of accounts work. We’d rename them (of course)—I liked the suggestion of 401Kids. But more important than the name change was Kathryn Anne’s proposal that every child in the U.S. be automatically enrolled in one of these savings accounts at birth, and that, depending on their parents’ income, some would receive seed funding. Imagine a future where every child has a savings account the same way they have a Social Security number—it’s simply part of being a U.S. citizen.

If every child has a savings account from birth, we start to raise a nation of savers. And ideally, parents aren’t trying to fill the coffers on their own. This is where grandparents, aunts and uncles, siblings, cousins, community groups, employers, philanthropists, and state and local governments can step in to support.

Despite the unfortunate name, Trump Accounts offer families an easier way to save for their kids’ future, and they’re encouraging others to pitch in. But truly, you don’t have to use one of those accounts to help set your kid up for success. You could simply stick the money in a high-yield savings account (the safest option) or an investment brokerage (the option that offers the most potential growth—and also some risk). You could put it into a 529 (which is meant for education but can be rolled into a Roth IRA and offers the most tax advantages). The point isn’t necessarily to hit the max contribution limits right away. The goal is to be consistent, even if you can just afford a few dollars a month. And—when possible—don’t be ashamed to ask others for support in helping your child save for the future. It takes a village.

It might be uncomfortable to imagine what the world will look like in 60 years, but there’s one thing I’m pretty certain of. Having money doesn’t fix everything, but it does make life more secure. And while there are so few things we can control, you don’t need to be the wealthiest parent to provide your children with a strong financial education and a tidy nest egg. You just need to start.

-Lindsey

Saving for kids in the news

Babylist launched Early Investor, a new platform to help make it easier for friends and family to contribute to your child’s 530A or 529 accounts. I set one up for Freddy, even though he’s almost 10. A decade in, we still struggle to get our family to give money to his college savings account, even though they want to support him. I think the Early Investor account will make it much easier!*
A lot of people have asked me if they should open Trump Accounts. As with anything related to personal finance, it’s really up to your individual needs and goals. But don’t sleep on the $1,000 if your child qualifies! This Wall Street Journal article dives into some of the drawbacks of these accounts, which are important to consider when deciding where to put money earmarked for your child’s future.
I’m personally obsessed with 529 accounts and all the tax advantages they offer. But not everyone is so keen, and nearly every parent I talk to these days says something to the effect of, “Who knows if college will even exist in 10 years, what with AI and all!” Another essay for another day. Still, it’s interesting to read about one financial expert who doesn’t love 529s. Again, all of these decisions come down to your individual needs and goals!
While Trump Accounts could potentially usher in a generation of savers, they could also create a generation of investors. And financial institutions and fintechs are trying to figure out how to get in on the action, friend of The Purse Charlotte Cowles reports for The New York Times.
Babylist CEO Natalie Gordon penned an op-ed for Fortune on who’s missing from the development of Trump Accounts: moms.
You can check out all of our coverage for Babylist here, including articles on how much you should contribute to a Trump Account; how to choose the best 529 account; and why you might consider converting a Trump Account to a Roth IRA.

What else we’re reading (and watching and listening to)

Even talking about birth rates and fertility feels a bit icky, but I thought this article from Bloomberg about research from Harvard University economist and Nobel laureate Claudia Goldin highlighted an interesting shift: Educated women “are more likely to choose motherhood when they think their partner will share family duties. In other words, when men can’t be expected to pick up the slack at home, having a child isn’t worth it.” Friend of The Purse Corinne Low goes deeper here. -Alicia
I picked up Cherry Baby by Rainbow Rowell on Tuesday. I’ve been in such a reading rut this year, but I feel like Rowell’s books are usually a good cure when I can’t find anything else I want to read. (I adore Eleanor and Park and Attachments is a fun read, too.) This one hasn’t disappointed! -Lindsey
Seeing The Odyssey last week has sent me on a journey of my own, learning more about antiquity and the Bronze Age. I started with this lecture from historian Eric Cline on the collapse of the great Bronze Age civilizations, and I’m now listening to his book on the same subject, 1177 B.C.: When Civilization Collapsed. -Alicia
Can I just say that the 15-game win streak by the Boston Red Sex got me through the last few weeks of studying? Just the absolute most fun time! -Lindsey

On our radar

My dear friend Allegra LaViola represents the incredible artist Wendy Red Star, who has a proposal for an epic sculpture on the High Line Plinth. The piece is titled “One Blue Bead,” and you can submit support for the project via the High Line website. I’ve been low-key obsessed with Wendy’s work since I first saw her show “Brings Good Horses” at Allegra’s gallery, Sargent’s Daughters, the day I got my second Covid-19 vaccine in the late spring of 2021. Such a happy memory! -Lindsey
My story about DINKs’ weekend spending is live on Yahoo—thank you to The Purse readers who participated! -Alicia
Friend of The Purse and career coach Nikki Edelman is hosting a workshop next Wednesday, July 29, at WTHIN on the Upper East Side. As Nikki explains it, it’s “perfect for anyone considering a career change, adjusting to new motherhood, navigating shifting priorities, or facing a big decision.” Nikki will be leading coaching exercises, and there will be acupuncture sessions as well. Suggested ticket price is just $15. I’m sure it’s going to be an amazing evening. I would be there if I weren’t going to be out of town. Learn more here! -Lindsey

TikTok of the week

I also interviewed Barbara Ginty, a CFP and new mom, to get her take on Trump Accounts for the Family Money podcast.

@babylist
The name alone has made some parents hesitant. Before you write off Trump Accounts, it's worth understanding what they actually are and the protections that come with them.
♬ original sound - Babylist

Comment of the week

“I have a long way until retirement but I’d love to get my masters one day so I can teach nursing students part time during my ‘retirement’ years. I think this would be fulfilling while also being practical.”

-Chrissy on “What’s your ideal retirement?”

What else we published on The Purse this week

For paid subscribers, a great Google Drive hack and shrimp okonomiyaki recipe await.

Let us know!

She recently took a pay cut for more stability.

A 401(k) and IRA aren’t the only types of accounts that are good to have for retirement savings.

The best money we spent this week

I had a great time meeting Lindsey for lunch in Manhattan and then visiting with my sister yesterday on a seemingly rare good weather day in NYC. I didn’t spend much outside of subway fare ($6), so thanks for lunch, Lindsey! -Alicia
I’ve been indulging in a bit of celebrating this week after passing the CFP exam. Dinner with my parents and Ken and Freddy on Monday, dinner and too many margaritas with mom friends on Wednesday, lunch at ABC Kitchen with Alicia yesterday, and then mocktails and snacks with Laura Fenton in the late afternoon. I’m still trying to puzzle out how my portion of dinner at Sailor on Wednesday was only $120 with tip—we ordered all the drinks and food. But it was delicious, and I highly recommend it! -Lindsey

*Babylist is a financial supporter of The Purse.