Financial planning for children isn’t a single decision—it’s a series of age-appropriate steps that evolve as both the child and parent move through different life stages. The most effective plans start early, stay flexible, and emphasize habits over dollar amounts. Below is a practical timeline parents can use as a guide, with goals and tasks for both parent and child.
Birth to Age 3: Laying the Foundation
Goal: Preparation for the child’s future
- Open a 529 college savings plan. Parents can open a 529 as soon as the child has a Social Security number. Starting early allows compound growth to do most of the heavy lifting. Every dollar invested at birth should return approximately 4x by the time the child is 18. For more information on the Iowa program, please
consult www.isave529.com. - Review life insurance and estate plan. The arrival of a child necessitates a review of what happens if you and/or your spouse pass away and who will be responsible for your child’s care and inheritance. If you have questions specifically about estate planning, please contact the Iowa State Bank Trust Department.
Ages 4-12: Introducing the Concept of Money
Goal: Introducing and demonstrating positive money habits
- Use allowances intentionally. Small allowances tied to simple responsibilities help introduce earning and spending. A number of apps and platforms allow for small dollar saving and investing for minor children.
- Open a savings account. Many banks, including Iowa State Bank, allow custodial savings accounts with a parent as joint owner. This helps children understand deposits, balances, and delayed gratification.
- Increase 529 contributions if possible. As income rises, parents may be better positioned to accelerate education savings. The maximum tax deduction in Iowa is $6,100 per beneficiary account (and each parent can maintain their own account for the same child).
Ages 13-18: Building Independence
Goal: Develop habits leading to financial autonomy into adulthood.
- Open a checking account with a debit card. Many banks offer teen checking with parental controls.
- Begin conversations about college costs. Be realistic and transparent about college costs, as well as paths of study and potential financial consequences. As enrollment nears, have open discussions about scholarships and financial aid.
- First job = first Roth IRA opportunity. If the child receives W-2 income, they (or you on their behalf) can contribute to a Roth IRA (up to the annual limit of $7,500 or earned income, whichever is lower). The contributions are after-tax, so the money will grow tax-free, making it a powerful future retirement tool. Most investment brokerages allow for minor Roth IRAs. Once money is contributed, ensure that it gets invested appropriately in a stock-heavy index fund or ETF*. A mere $3,000 invested at age 18 and invested in the stock market should grow to nearly $100,000 by the time the child turns 63.
A Final Note for Parents
Financial planning for children works best when it aligns with the parents’ own financial health. Adequate retirement savings, emergency funds, and insurance coverage should come first. The goal isn’t to give children everything—it’s to give them the skills and structure to succeed on their own.
A thoughtful timeline turns financial education into a normal part of growing up, rather than a one-time conversation.
This year marks 85 years of Iowa State Bank serving the communities we call home. It’s a milestone built on generations of trust, relations, and shared growth, rooted in supporting families through life’s milestones. If you are interested in learning more about how Iowa State Bank can financially partner with you or your child, please call 515-288-0111 or stop by any of our 5 convenient locations to speak with one of our bankers.
*Investing involves risk. There is always the potential of losing money when you invest in securities. Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets. You should consult your legal and/or tax advisors before making any financial decisions. Investment products are not FDIC
insured, are not bank guaranteed and may lose value.
Written by Dylan Dinkla, J.D., CFP®, and VP Trust Administration Manager for Iowa
State Bank Trust & Wealth Management Department.
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