Had a baby in Colorado since 2020? Do you like FREE Money? Here’s the financial choices I’m making:
Amy and I have two kids, one born in 2024 and one in 2026, and I have spent a lot of hours researching the different accounts, tax benefits, government programs and savings strategies available to them. We also have a pipeline of soon-to-be parents in our friend group, and this blog is for them.
There is so much information out there, and most of it makes this way more complicated than it needs to be. Here are my condensed takeaways for Colorado parents.
Disclaimer: I am not a CPA or financial advisor. This is what I found through my own research and what we're considering for our family. Talk to your CPA/financial advisor about your own situation, especially when it comes to employing your kids or making contributions through a business.
BEFORE WE EVEN TALK ABOUT KIDS' ACCOUNTS: Don't Forget Colorado FAMLI
This isn't money for your kid's investment account, but it's potentially thousands of dollars for YOU after having a baby.
Colorado FAMLI launched in 2024 and it’s pretty awesome! It provides wage replacement for 12 weeks of parental leave beyond what your employer does. W-2 employees are most likely already participating through payroll and your employer can walk you through filing a claim.
For those self-employed, you will need to voluntarily opt into the program and I would absolutely make sure you understand the program 6-9 months before having a baby. Depending on your business structure and if you have been paying into the FAMLI program, you should be able to take a parental leave following your baby’s arrival and receive 12 weeks of income. It’s capped at $1,448/week, but that’s still $17k that you’ve worked for and contributed towards! It’s a little bit tricky to setup, but please reach out to me if you want to discuss! Here is CO FAMLI’s brochure for those self-employed.
Now lets get into investment account for kids, broken into two categories: W2 and self-employed.
If You're a W-2 Employee:
1. Open the CollegeInvest Colorado 529 + the First Step application
Colorado's First Step program gives eligible Colorado kids born or adopted on or after January 1, 2020 $121 deposited into their CollegeInvest 529 PLUS a $500 match per year for the next three years. That means if you contribute at least $500 each year, you're looking at $1,621 in FREE money.
You do have to actually enroll in First Step. Simply opening a 529 isn't enough. This is the part a lot of people forget.
Navigate here to open your account: I recommend the Vanguard one.
Once setup, navigate here to apply for First Step.
If you do nothing else after having a baby in Colorado, I would at least do this.
Ideally you will continue to contribute a comfortable amount for the next 10-15 years. You will have a better understanding of your kid and their potential costs of education around then. Some good news if you are worried about overfunding:
1. You can change the beneficiary to a different child at any point
2. You can roll $35,000 into the beneficiary’s ROTH IRA, under current regulation (which will probably change by the 2040s)
2. If Your Baby Was Born in 2025 or Later: Claim the $1,000 Trump Account Contribution
If your child was born between January 1, 2025 and December 31, 2028, the U.S. Treasury will make a one-time $1,000 contribution to their Trump Account. Again: free money. Everything for this goes through an app that I actually found very good. First you must complete the Form 4547, then submit an account application, then you are all set. The $1,000 will show up within a few weeks.
Here is the link to the app.
One thing I love about this account: all dollars are automatically invested into SPYM, a super low cost S&P index fund. You don’t even get a choice, and I like having less decisions to make.
Our daughter was born in 2026, so I opened one for her obviously. Our son was born in 2024, so he doesn't qualify for the $1,000, which made it trickier. We did open one for him, but only because we are self-employed. More info on that below.
Without the free $1,000, I don't see a huge reason for the average W-2 family to rush to fund one instead of prioritizing things like your own retirement funds, savings/investments, or a 529. Trump Accounts don't have the same tax treatment as Roth IRAs or even Traditional IRAs. You’re putting after-tax dollars into the account and distributions later have taxable components for your child. If Your Child Was Born Before 2025, I don’t think You Need a Trump Account.
There could be some interesting long-term strategies involving Trump Accounts and Roth conversions once your child is 18 and potentially in a very low tax bracket. But that's getting way beyond my "keep this simple" goal.
Now, If You're Self-Employed or Own a Business...
This is where things get more interesting.
Amy and I own our business, so I went much further down this rabbit hole.
1. Still Do the Colorado 529 + First Step
Same answer. Open the CollegeInvest 529. Apply for First Step. Don't leave $1,621 sitting on the table.
2. Open Trump Accounts for BOTH Kids
If your child was born in 2025–2028, claim the $1,000 federal contribution. But business owners also have another potential reason to pay attention to these accounts. The rules allow qualifying employer contributions to an employee's dependent's Trump Account. This is one where I would talk to your CPA/payroll provider before moving money. The ability to contribute through a business, the tax treatment, and exactly who qualifies depend on how your business and employment are structured.
For 2026, the employer contribution limit is up to $2,500 per employee, and total Trump Account contributions are subject to a $5,000 annual limit. Great for those of us with 2 kids! So assuming you can contribute from your business and take that as a business deduction, you should.
3. Lastly, If Your Kids Can Legitimately Work for Your Business, let them.
This strategy doesn’t give “free” money like the above options but is still a favorite of mine. If your child can perform legitimate work for your business, you can employ them and pay them reasonable compensation. For us in real estate, that could mean things like appearing in marketing, photos or videos, yardwork for a listing, and helping with other age-appropriate tasks. Your accountant will tell you to document what they did, pay a reasonable market rate, keep records, etc.
In 2026, someone with eligible earned income can contribute up to $7,500 to a Roth IRA. So hypothetically:
· Your child legitimately earns $7,500 working for your business.
· You open a custodial Roth IRA for them.
· The $7,500 income goes into that Roth.
That money potentially has decades and decades of tax-free growth ahead of it. And even better, contributions to the Roth IRA can be used for their education. But if they aren’t, they just keep growing for their first home, retirement, etc.
If $7,500 were invested when your child is 1 and earned an average 7% annual return, without another dollar ever being contributed, it could grow to roughly $600,000 over 65 years.
Other Options?
There are dozens of other account options, some of which I’ll quickly mention below. Frankly, I find they overcomplicate the portfolio. My brain struggles to handle more than 2-3 accounts per kid. Let me know if you disagree!
UTMA/UGMA: Basically an investment account where the assets belong to your child. It's much more flexible than a 529 because the money isn't limited to education, but the tradeoff is that eventually your child gets control of it. I'm not convinced we need one. One reason I'm less worried about “overfunding” a 529 than I used to be: current law allows up to $35,000 of unused 529 money to eventually be rolled into the beneficiary's Roth IRA.
Coverdell ESA: Another tax-advantaged education account, but contributions are capped at $2,000 per year and there are income restrictions. For us, the Colorado 529 is simpler and more attractive.
Custodial Savings/High-Yield Savings: Totally fine for birthday money, savings, or money they'll need in the near future. For money we don't expect them to touch for 15–20+ years, I'd personally rather have it invested.
Custodial Brokerage: Gives your child an investment account without the education restrictions of a 529, but again, the assets belong to them. For us, I'd rather keep additional taxable investments under our control and decide later how and when we want to help our kids.
My Very Condensed Summary:
If I had a baby in Colorado between 2021 and 2026, here's my order of operations:
Every Colorado parent: Open the 529 and complete First Step. Get the free $121 and work toward the $1,500 match.
Baby born 2025–2028: Open the Trump Account and claim the $1,000 if eligible.
W-2 family with a pre-2025 baby: I wouldn't feel like you're missing out by not funding a Trump Account. I'd prioritize your own retirement and savings, the 529 and eventually a Roth IRA once your child has earned income.
Business owner/self-employed: Talk to your CPA about Trump Account employer contributions AND whether legitimately employing your children makes sense.
Child has legitimate earned income: Open the custodial Roth IRA. This is the one I personally get most excited about.
The biggest thing I learned after spending way too many hours researching all of this?
You don't need 14 different accounts for your kid. Take the free money that's available. Take advantage of the tax benefits that actually apply to your family. Invest early. And, most importantly, don't sacrifice your own retirement trying to make your two-year-old financially independent.
