College Savings Options (GoodFinancialCents.com) - YouTube

This is Jeff Rose, Certified Financial Planner.

Are you a parent that's worried about the rising cost of college education?

If you're not, maybe you should be.

I recently just read this report that according to the College Board it's estimated by the

year 2028 it will cost you roughly $340,000 to send one child to a four-year private university.

I repeat, $340,000 to send one child.

Think you're getting better off sending them to a four-year state university?

It's still estimated to cost you roughly $95,000 to send your kid to a state school.

So as you can see you probably need to be concerned about the rising cost of college

education.

If you know you need to save but aren't really sure how, let me introduce to you some of

the tools and options you have available when it comes to saving for your kid's college

education.

One of the more popular options when saving for a kid's college is opening a simple savings

account.

You can do so at a local bank, a credit union, or even do it online.

All you need to do is set up the account and start automatically having money deposited

into it.

The only down side of opening a simple savings account is the interest rate you'll make.

If you're not aware of this, interest rates are at historic lows so you're not going to

be making a whole lot of money on your savings account.

The other down side is that there is no tax benefit by doing so, but savings is savings

so opening up a savings account at your bank is a great start to getting savings toward

your college education.

If you're looking for some other options for saving for your kid's college education, let

me introduce to you some of the more tax-advantage plans that are out there for you, the first

of which is called a custodial account.

By setting up a custodial account, the parent is the custodian of the account with your

child being the minor, so the advantage to this is that the interest rate is taxed based

on the kid's tax rate.

There can be some tax advantage by doing so.

The other advantage is that as the child is a minor the parent is in control of the money,

so the parent decides how that money is invested and when the child can have access to the

money.

Now the one down side with the custodial account is that once that child reaches the age of

majority- in some states that 18, other states that could 21- they are now in control of

that money.

So if you've been saving money into this custodial account for the last 18 years, now the child

can resume control of that, and they can do with it what they please.

They can spend it on college or anything else for that matter.

I will let you fill in the blank on what some of the things they could spend that money

on.

If you're looking for a little bit more control, let me introduce to you another very popular

option when it comes to saving for your college education.

Probably the most popular option when it comes to saving for your college education is a

529 Plan.

Most states offer their own 529 Plan.

Be sure to check your state to see what applies, but typically here is how it works.

All the money that is put into the 529 Plan is after tax, so you don't get any tax benefit

initially by putting money into it.

But the neat little thing is that all the interest and the earnings that accumulate

in this 529 account, as long as you use that for college or college-related expenses, you'll

never pay any income tax on that money whatsoever.

Sounds like a pretty good deal doesn't it?

It sure can be.

One of the other benefits to the 529 Plan is this: Even when the child reaches the age

of majority, no matter if that is 18, 21, or whatever, the parent is always in control

of those funds.

Therefore, the child can never tap that money and spend it how they please.

For a lot of parents and grandparents that's a very, very popular and favorable option

when it comes to the 529 Plan.

As you can see when it comes to saving for your kid's college you have many, many different

choices.

It is just important to try and figure out what is important to you: control of that

money, tax advantage, being able to move or have access to that money when you please.

When you try to discover some of these that are important to you, that will then help

dictate which of the college savings plan options are more attractive to you.

If you have any more questions regarding saving for your kid's college, be sure to drop me

a line.

I will be glad to help you out best I can.

The opinions voiced in this material are for general information only and are not intended

to provide specific advice or recommendations for any individual.

To determine which investment(s) may be appropriate for you, consult your financial advisor prior

to investing.