The price of higher education is increasing year by year, and with no end in sight it’s never too early to start saving for college. Rather than opening a savings account and stowing away a portion of your paycheck based on current tuition rates, you should consider making plans for a dedicated college savings fund. The sooner you start, the more you can accumulate for your future graduate.
HilltopSecurities’ trusted advisors are here to help you plan and maintain your college savings plans. A couple of common, tax-advantaged options you should consider include the college 529 savings plan and the Coverdell Education Savings Account (CESA).
- College 529 Savings Plan – Also known as a qualified tuition plan, the college 529 savings plan is sponsored by states, state agencies or educational institutions and is not subject to federal tax (and in some cases, state tax). With this method of saving, investors contribute a pre-defined amount to the plan. The plan then invests these contributions in a variety of securities products, including stocks, mutual funds, bond mutual funds, money market funds and even portfolios that vary by risk threshold as the student approaches high school graduation. Other conditions apply.
- Coverdell Education Savings Account (CESA) – This option is a trust or custodial account that is set up solely for paying a beneficiary’s tuition and expenses – also referred to as qualified education expenses. A CESA must be established on behalf of a student before they turn 18 and guardians can contribute to the account via cash deposits. Once set, the CESA beneficiary is eligible to receive tax-fee distributions to pay for qualified education expenses. Other conditions apply.
Each college saving option has benefits and drawbacks and may have a different impact on your taxes and eligibility for financial aid. To determine which options work best for your circumstances, you should consult with a tax or financial advisor.
HilltopSecurities’ trained and knowledgeable financial advisors can help guide you through this process and help you build college savings plans that make the most of your resources and meet the specific needs of you and your future graduate.
To explore your options and start building a college saving fund today, contact a HilltopSecurities financial advisor near you.