San Antonio

Money Smart: 5 ways to save for child’s college education

The value of attending college is about as a lot as a luxurious automotive. If you’re occupied with saving for your child’s education, listed here are 5 ways to begin.

SAN ANTONIO — The value of attending college is about as a lot as a luxurious automotive. If you’re occupied with saving for your child’s education, listed here are 5 ways to begin.

1. Custodial account

“These  were very popular in the 1980’s and you literally, would have the parent or grandparent be a custodian on the account for the child or grandchild,” defined Karl Eggerss, senior wealth advisor and companion of Covenant. “A big negative of a custodial account, which is often referred to as a UGMA or UTMA, is the fact that at the age of 18 in Texas, the child has complete control of the investments in the account regardless of what it’s used for.”

2. Coverdell Education Savings Account

“They’re very versatile. What I don’t like about them is that they’ve a low restrict. You can solely put away $2,000 a yr. If you needed to save extra, you’d have to have a look at a distinct avenue,” mentioned Eggerss.

3. Roth IRA

“We always think of ROTH IRA’s in terms of saving for retirement but they can used for education as well. So that may be something to start. And actually, a parent can start one for themselves and transfer it to their child at some point. You may be able to start one for an unborn child. Then, once that child is born, you can transfer your ROTH IRA to a child,” explains Eggerss.

“This is something you can put money into after tax. But it grows tax-free if the money is used for college down the road. It can be transferred within the family. If one child doesn’t go to college, the other one can use that money. It can be used for trade school so it’s pretty flexible,” he mentioned.

5. Personal account

“If the child gets a scholarship and doesn’t need that money, or you don’t want them to have that money, you could use it for your own retirement. It’s always in your own name. It may not have all of the tax benefits like some of the other ones previously mentioned but it gives you 100% control over the money,” mentioned Eggerss.

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