college savings

Saving up for college can be daunting. There is so much unknown like what school your kids will choose, the tuition, if a scholarship will be offered… Opening up a college savings account will help ease some of your stress by helping you save for the future and have the ability to invest that money into your children’s education. Here we will dive into the top two college funds available so you are able to decide what works for you and your financial statues now, that will help shape a better future.


529 plan

A 529 college savings account is one of the most beneficial ways to save up for college. How it works is simple, you open up a 529 plan and start making post tax contributions to the account, then let it sit. The money you put in is invested at a low risk rate and it grows the longer you leave the money in. Since you have already paid taxes on the money you have put into the account, you won’t have to pay taxes on that money again. However, you will owe taxes on the interest’s earnings if you do not use the money for school related expenses. If you spend the funds on tuition, books, supplies, or anything else that classifies as a school expense you can use the entirety of the money in the account tax free.


Custodial Account

A custodial account is opened by a parent or guardian and is set up to benefit their child. The idea is that parents can set aside money into their child’s account that gains interest at a higher rate. The contributions given by the parent are not tax deductible but if you put money in as a gift you can gift up to $15,000 per child per year without having to pay taxes. The child will have access to the money in the account at the minimum age of 18-21, depending on your states regulations. Once the money is in the custodial account it cannot be used for anything other than to benefit the child. In other words you can’t take back the money if you want to upgrade your car; it now belongs to the child. One of the only drawbacks to a custodial account is that your child may be subject to taxes. If the account has enough money in it that you are required to file taxes they will have to be filed under your child’s name as the money and account belong to them. They will be subject to the child tax rate which is a lower percentage than normal.  Each account can have two parents as joint custodians but only one child can be on the account. So if you have multiple children, you’ll need more than one account.


There are a few options available when it comes to financing your child’s future. It’s always good to give them a little head start financially, but remember to teach them good financial habits. Having them get a job to help pay for some expenses helps teach them the value of hard work and have some more appreciation for the hard work you put into helping them further their education.