As my son quickly moves past the toddler stage and elementary school rises in the distance, my husband and I are beginning to think about our son’s education in earnest. We want to be prepared for him to attend a college or a professional / trade school someday. With the cost of higher education just that – higher than ever before – how do we make the most of our savings? There are a lot of options out there, including pre-paid tuition plans, 529 savings plans, Coverdell Education Savings Plans, and custodial accounts, to name a few.
This is where an appointment with our financial advisor comes in. A financial advisor can review our current and future incomes, our tax bracket, our existing savings plans, our assets and our debts. With this information, he can make recommendations based on the right mix of savings options for us. But since I never go into any appointment empty-handed, I’ve done some research and have a list of questions ready. Here are things I learned that you may want to consider too.
- The amount of money you and your child have put aside for education may make a difference in the amount of financial aid your child is eligible for. If your child would likely qualify for financial aid, your advisor can recommend solutions that minimize the impact the savings options you choose have on qualifying for that aid.
- Are you looking for tax breaks or at receiving gifted money for your child? Options exist that provide tax advantages both now and in the future and allow others to contribute to your child’s education too.
- There’s always the uncertainty of whether your child will actually need the money for school. What if they don’t want to go or want to buy a car instead? Your advisor can recommend plans that you control, that can be transferred to other children (or even back to you) if your child doesn’t need the funds. An advisor can also explain any penalties for withdrawals.
- Finally, with the addition of any new education savings plan, will you still have enough money saved for your future? A good advisor will look at the entire picture – not just set up an educational savings account. A comprehensive savings plan should strike a balance between securing your retirement and providing for your child’s education.
Like all parents, I want to provide the best for my son. That includes wanting him to make his own decisions about his future career. With a little help, I aim to be prepared for whatever he chooses.
What strategies have you used to save and invest for your children’s education?