Flexible Ways to Save for Your Kid’s Future

For decades, saving for a child’s future has largely meant one thing: college. Parents and grandparents would set money aside with the goal of helping cover the rising cost of higher education.

But today, that mindset is starting to shift. More families are recognizing that a successful future doesn’t follow a singular path. For some, that may still mean a traditional college or university, but for others it could mean trade school, starting a business, pursuing a creative path or buying a first home earlier in life.

With so many possibilities, families are asking a more nuanced question: How do you save meaningfully for a child’s future without locking that money into a single outcome?

The answer doesn’t start with a specific financial instrument. It starts with a philosophy.

Start with your own foundation

Though it may feel counterintuitive—especially for parents and grandparents who are eager to help—it’s critical to prioritize your own retirement before setting aside dollars for a child’s future. While there are student loans, scholarships and alternative paths for funding education, there are no such backstops for your retirement.

You can help get yourself on track for retirement by:

• Contributing to your employer-sponsored retirement plan (like a 401(k)) and taking advantage of the company match at a minimum, and
• Leveraging other tax-advantaged accounts such as IRAs.

Only once your long-term financial independence is on track does it make sense to shift your focus toward saving for the next generation.

Build in flexibility from the start

Once you’re ready to begin saving for your children or grandchildren, a key goal to keep in mind is optionality. Rather than putting all your savings into vehicles with strict rules, consider an approach that allows for:

• Different future uses, and
• Reallocation across children or goals.

In other words, you’re not just saving for college—you’re building a pool of resources that can support a range of possibilities.

A surprisingly flexible tool: The Roth IRA

While not designed specifically for education, a Roth IRA can actually play a powerful supporting role in a flexible savings strategy.

Here’s why:

• Roth IRA Contributions (the principal you put in) can be withdrawn at any time, tax- and penalty-free.
• Earnings grow tax-free if left in place for retirement.
• There’s no requirement that funds be used for education.

This creates a compelling dynamic. If your child ultimately needs help with education, those contributions can be accessed. But if they receive scholarships, choose a lower-cost path or don’t need the funds, that money can simply remain invested toward your retirement.

In that sense, a Roth IRA isn’t an “education account”—it’s a retirement account with built-in optionality.

The evolution of the 529 plan

For many families, 529 plans remain a cornerstone of education savings, and recent changes have made them more flexible than ever.

Traditionally, 529 plans offered tax-deferred growth and tax-free withdrawals for qualified education expenses. But the definition of “qualified” has expanded under the One Big Beautiful Bill Act (OBBBA). Today, 529 funds can often be used for trade and vocational schools as well as certain K-12 education expenses.

Even more notably, recent rule changes allow for unused 529 funds to be rolled into a Roth IRA for the beneficiary, up to a lifetime limit of $35,000, without incurring taxes or penalties (provided the 529 plan has been held for at least 15 years). This helps address one of the biggest historical concerns: overfunding the account.

Another advantage is control. In most cases, the parent or grandparent owns the account, not the child. That means you can:

• Change the beneficiary if needed,
• Shift funds between children, and
• Retain decision-making authority.

Taken together, these features make the modern 529 far more adaptable than it once was.

New “Trump Accounts”

There is also growing interest in the so-called Trump Accounts. These accounts have been designed with flexibility in mind, so they can help support a range of life milestones, such as:

• Higher education,
• A down payment on a first home (up to $10,000),
• Birth or adoption expenses (up to $5,000), and
• Retirement.

Access to the funds in these accounts does not begin until age 18, and the tax consequences vary for each of these scenarios. It’s also important to note that the rules governing these accounts are still being developed, and you won’t be able to start making contributions to them until July 4, 2026.

For more information on how withdrawals work, read our recent article on Trump Accounts.

Other flexible strategies to consider

Beyond these options, you can also incorporate additional tools that prioritize flexibility.

Taxable brokerage accounts

These offer complete freedom—funds can be used for any purpose at any time. While they don’t carry the same tax advantages as retirement or education accounts, they provide maximum optionality.

Custodial accounts (UTMA/UGMA)

These accounts transfer assets to a child’s name with no restrictions on how the funds are ultimately used. However, they do come with trade-offs, including loss of parental control once the child reaches adulthood and potential impacts on financial aid.

Whole life insurance

In some situations, you may be able to leverage the cash value of your permanent life insurance policy as a supplemental, tax-advantaged pool of capital.

You can access the cash value of your permanent life insurance policy through*:

• A life insurance loan, which gives you access to the cash value; you can repay the policy on your schedule.
• A partial surrender, which allows you to take some money out of the policy if you don't plan to repay it.

There are pros and cons to each, so it’s smart to connect with your Northwestern Mutual advisor first.

A blended approach often works best

In practice, the most effective strategy is rarely about choosing a single account type. Instead, it’s about layering different tools, each serving a specific purpose

A well-balanced approach may include:

• A foundation for your future: Prioritize your retirement savings first to help ensure your long-term financial independence.
• A flexible pool of assets: Use tools like a Roth IRA, taxable brokerage account or whole life insurance policy to create a pool of dollars that can be used for a wide range of future needs.
• Targeted education savings: A 529 plan adds tax benefits for education-related expenses while still offering more flexibility than you may realize.
• Targeted future planning: Depending on your goals and financial picture, additional strategies like custodial accounts or permanent life insurance can complement your strategy.

This approach diversifies not only your investments but also your options.

Plan for a person, not a path

At its core, saving for a child or grandchild isn’t about funding a specific expense. It’s about creating opportunity. And opportunity rarely follows a linear path.

By prioritizing your own financial security, building flexibility into your strategy and using a thoughtful mix of savings vehicles, you can support the next generation without overcommitting to an uncertain future. After all, the real goal isn’t just to pay for college. It’s to give them the freedom to choose what comes next.

Reach out to your Northwestern Mutual advisor to start building a savings plan that meets your family’s needs.

*The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance accumulated value to supplement retirement income will reduce the death benefit and may affect other aspects of the policy.