Updated: Apr 5, 2018
Do you have kids? Do you push education in your household? Is it important that your children become skilled and/or gain the ability to make a good living? Regardless of the answers, the looming question does not concern the “how” relative to their future economic viability, but the “how” with respect to paying for it all. Being financially prepared to aid in your child’s success will never be a bad thing.
“So what’s your story…. and how do I start with mine?”
Well, my household never pushed college as the sole pathway to success, but I can’t say it was because my mother was WOKE and wanted me to pursue entrepreneurialism and never work for “the man” (that’s an entirely different conversation for a later time.) One of the earliest and scariest realizations I had as I matriculated through high school was that I would probably be saddled with loans and have debt for the rest of my life. While I see the vast efforts by students, these days, to optimize their education while minimizing their out of pocket costs, I must concede that I was not like them.I was the hustler that cut grass and worked for spending money. Youth these days hustle the robotics clubs and earn scholarships with their tech skills and out of the box thinking. I was regular degular, those were the old days...was there anything else that could have been done on my behalf that would secure financial backing and reduce the burden on a young brother just trying to make it? In what way could my parents have gotten ahead of this ensuing debt?
As a tax paying citizen of these here good old United States of America, parents/guardians/salaried workers, can stash away money for their children; money that can grow over time and cover future expense in part or in full. These educational plans are structured such that certain tax benefits apply each year while all you do is save the money and watch it grow. Sounds like a bomb plan, right? Well before you get all excited and alter your lifestyle to put away money for young Marvelous Marcus, be informed about the right plan for you. Check into alternative methods of investing money to maximize growth (be weary of increased risk with “high return” investments). At the end of the day, some money set aside for educational purposes is better than no money... and please keep in mind that each state usually has a specific plan with specific benefits that can vary widely from state to state.
We didn’t want to cover everything in this one blog post, but we did want to include some starter research for all our readers to consider. This process can be very confusing and suck the life out of you when all you want to do is shed responsibility, have fun with your friends, and take naps all day. That is where we come in, with a tidy simple research summary and a starter checklist to assist in your journey 😊.
The Coverdell Education Saving Account (ESA) Plan and the 529 Saving Plan (plans vary by state) are two popular education savings plans. Both plans allow your after-tax contributions to grow tax-free in an investment account. As long as the distributions (withdraws) are used for qualified educational expenses, you do not have to pay any taxes on it. Below is a table of the main differences between the two plans.
There are many ways to save money and prepare for special future events, but we are here to help you become fiscally responsible, not just save money. Setting S.M.A.R.T.* goals and working to elevate your financial position through programs boasting good tax benefits, is all part of the movement.
Below is a link to low cost ESA providers:
* Specific, Measurable, Achievable, Relevant, Time-Limited (S.M.A.R.T)