This is a sponsored guest post.
Thinking about college education for your child when you are just a few years or months into parenthood can seem far-fetched. However, a keener look into the reality proves it legitimate. Recent research has revealed the torment that it is to pay college fee loans, which can drag on for several years and deny you the chance to make meaningful investments. And your child will need more than just the college fee, so the savings you make today will, in essence, go a long way in helping with other college needs, like when the student has to hire professional writing services.
The benefits of saving something for your child’s college are just so many. Today, a student needs not only the tuition fee but also some extra cash to help when he has to contract someone to write him a research paper for money and to pay for some trips every few months. And as the burden of paying college loans gets more and more scary, you are obviously trying to figure out how to save your child from the stress. The following tips will help you save for your child’s college fee and ensure stress-free learning for your loved one.
Open a Savings Account
With the inflation rates that keep soaring high, you will need to save for quite some long time before you have enough for your child’s college education. Opening a savings account is one way of achieving this, but it requires some level of discipline.
The problem with this option is that you will actually be losing because the rate of yields might not be much; especially compared to if you had invested the same amount in business. Again, saving in your child’s name could end up working against them when it comes to qualifying for financial aid. Having had money in his account for some time may be taken to mean the student is able to pay the fees, thereby disqualifying them from the aid.
Despite these weaknesses, it still makes a lot of sense to open a savings account for your son or daughter and start throwing in some little savings bit-by-bit. Even if you anticipate that your child will get some other source of funds, it still makes sense to save. In college, he/she will have many other needs, and can use any extra amounts in getting someone to help with their research paper, or for any other need they may have.
These are education-designated accounts that guarantee tax-free growth from the investment of your after-tax money. Different US states have different 529 plans, and the good news is that you can choose the one you want. The beautiful feature of this plan is that even if the child does not go to school for whatever reason, you can change the beneficiary of the account so that a different family member goes to school courtesy of the plan. However, if you opt to use the account for other non-educational expenses, the earnings will be subjected to taxation, and you could face some state penalty, depending on the particular state and the situation leading to the change.
UTMA/UGMA refers to Uniform Transfer/Gift to Minors Act. As opposed to the 529 plans, UTMA/UGMA goes beyond just education. The savings can be used for anything else as the child would find necessary once he/she gains control of the account. The parent or guardian opens and runs the account until the child reaches 21 years, then transfers the control of the account to him/her.
The main advantage of this option is that the funds in the account are not restricted to education, and can be used in other expense. If your child ends up getting a sponsorship, the amount in this account can help them with their upkeep, or even in getting the services of online essay writers whenever they will need them. It also comes with tax advantages to the contributor. However, the freedom to choose what to do with the funds means the child/student can misuse the funds and end up not paying college fees. In this case, it kills the parent’s dream for good college life for the son or daughter. Another problem is that you cannot change the beneficiary after selecting one.
This is also a tax-advantaged retirement benefit where you contribute your after-tax money and can be used for college savings, just like the 529 plan. However, it allows you funds (free of tax or penalty) to pay for specified educational expenses after five years. And if your child ends up not needing these savings for college, you are free to use the funds for your retirement.