We all want the best for our children, especially when it comes to their education. But college is so expensive these days, and might be even more expensive by the time your child is ready to move to campus. That’s why it’s critical to begin saving for your child’s education as soon as you can.
There are many options you can choose from when it comes to saving for your child’s education.
The good news is that there are many ways to do this. Here are details on a few of the ways that you can start building up funds for your child’s education.
UGMA/UTMA Custodial Accounts- These accounts allow you to take advantage of your child’s lower tax rate while saving for their future. There are no income limits, but certain amounts are taxed differently. For children under age 19 and full-time students under age 24 whose earned income is less than one-half of their support, the first $950 of earnings is tax-free. Earnings between $950 and $1,900 are taxed at the child’s rate; earnings above $1,900 are taxed at the parents’ rate. Your child also gains control of the assets at age of majority, which is 18 or 21 in most states.
Your own investment account- Ideal for parental control, there are no income or contribution limits, and you control how and when withdrawals are made. Earnings are taxed to you.
Your Roth IRA- These aren’t just for retirement. However, you can pull out any needed funds with no problem and only pay tax on any gains. You can contribute up to $5,000 a year ($6,000 if you’re over 50), and you are in control of the assets. However, there are income limits, known as Roth IRA phaseout limits.
You can also use a Certificate of Deposit (CD) as a savings tool as well, so see our previous blog post to learn about using that tool.
By getting a head start on saving for your child’s education, you can escape from the worry or anxiety caused as they grow older. Call us or stop by today to see how we can help! Tags: CD, investment account, IRA, Roth IRA, savings