College Budget Planning
With the cost of college rising and student debt levels reaching historic rates,
it’s never been more important to start a college savings plan for your child.
As a parent or guardian, there are two main college funding plans that can set your
child up for success if they plan to obtain higher education. Remember, the best
way to grow your college fund is to save early and often.
Education Savings Account (ESA) or Education IRA
An ESA allows you to save $2,000 (after tax) per year, per child. Despite the funding limits, ESAs typically have higher rates of returns than a regular savings account. The account must be used by the time the beneficiary turns 30 and withdrawals are untaxed if the money is used for education expenses.
A 529 plan is an investment account that offers tax-free earnings growth and tax-free withdrawals when the funds are used to pay for qualified education expenses. For college, university and other eligible post-secondary educational institutions, this includes tuition, fees, books, supplies, equipment, computers and sometimes room and board. In addition to college costs, 529 plans may also be used to save and invest for K-12 tuition. There are two types of 529 plans: college savings plans and prepaid tuition plans.
To determine if you are on the right track for college savings, use the College Savings Calculator and contact professionals at Schell & Hogan, LLP today to set up a consultation.