Plan Now for Your Child’s Future
Children grow fast. Between teaching them how to ride a bicycle and watching them graduate high school, you need to ensure that you’re doing enough to put them through college. The sooner you start saving for your child’s academic future, the better.
When planning a college fund, there are several account options to consider. These include:
529 Plan
A 529 plan is a tax-advantaged, state-sponsored college savings plan in the US. It offers flexibility to cover many academic costs tax-free, including those associated with college and even K-12 tuition expenses. Each state has its own unique 529 plan, and you are not limited to your home state’s plan.
The two main 529 account types are:
Education Savings Account (ESA) or Education IRA
An ESA or Education IRA is another savings plan that offers tax-deferred growth and tax-free withdrawals for covering qualified academic costs.
Main characteristics of an ESA:
UGMA & UTMA Accounts
The Uniform Gift to Minors Act (UGMA) and the Uniform Transfer to Minors Act (UTMA) are similar to custodial accounts that are handed over to the beneficiaries (the minors) when they come of age. These accounts are not entirely tax-free, as they are taxed at the child’s tax rate.
These accounts are often used as college savings tools. But the beneficiaries have the freedom to use the money as they like. Both accounts are very similar, with the key differences being:
Standard Savings Account
A standard savings account can also be used for your child’s college expenses. These accounts grow with income earned through interest, and the money is highly liquid/easily accessible.
Choosing a college savings plan can be difficult, as there are so many options and factors to consider. The experienced financial advisors at Modern Family Asset Management can help you select a plan depending on your needs and circumstances. Contact us today for assistance with planning for your child’s future.
