Saving for your child’s education is one of the most significant financial commitments you can make. With the rising cost of tuition, starting early and using the right savings tools can ensure that you are financially prepared when the time comes.
Here are the best ways to save for your child’s education:
- Open a 529 plan: A 529 plan is a tax-advantaged savings account specifically designed for education expenses. Earnings grow tax-free, and withdrawals for qualifying education expenses are also tax-free.
- Use a Coverdell ESA: A Coverdell Education Savings Account (ESA) allows for tax-free growth and distributions for qualified education expenses. While contribution limits are lower than a 529, it’s a great option for early education expenses.
- Set up a custodial account: A custodial account, such as a UGMA or UTMA, allows you to save and invest for your child’s future while maintaining control of the funds until they reach adulthood.
- Save through regular investments: If you’re not using a 529 plan or ESA, consider investing in a standard brokerage account, focusing on long-term, low-risk investments like mutual funds or bonds.
- Automate your savings: Set up automatic transfers to your education savings account, ensuring consistent contributions and making saving a seamless part of your budget.
Starting early and contributing regularly will give you a head start in securing your child’s educational future.
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