How to Save for a Child's Education
Published May 18, 2012 | Updated May 22, 2012
"How Much Money Should I Save for My Child's Education?"
This is a question that can best be answered by meeting with an Investment Advisor. Amplify Wealth Management, through CFS, offers complimentary consultations. Call us at 512-519-5476 when you’re ready to schedule your complimentary appointment.
The amount you’ll need to save is impacted by many factors, such as:
- the length of time you have to save
- whether your child will attend a public or private school
- your child's eligibility for financial aid
- inflation rates for college tuition
According to collegesavings.org, college costs generally increase each year at about twice the rate of inflation. If you plan to help pay for the cost of a college education for your children or grandchildren, the earlier you start saving, the more time your money has to grow.
Choosing a Funding Plan
You'll want to choose an education savings plan that is tax advantageous and has the benefits you need. Coverdell Education Savings Accounts (CESAs), 529 College Savings Plans, and Custodial Savings Accounts are a few options offered by the Amplify Wealth Management team, through CFS. We recommend working with your Investment Advisor to help you select the education funding plan that best suits your needs.
Other Factors to Consider
Keep in mind that while transferring assets to your child may offer you tax benefits, it can have a negative effect on the child’s ability to qualify for financial aid when it comes time to do so.
The need analysis formulas used to determine financial aid assume that a child contributes a greater portion of his or her assets (and income) than the parents. That means tax-sheltering strategies often significantly reduce eligibility for financial aid. Be sure to discuss both the tax implications and financial aid implications of asset ownership with your tax professional.
Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
If your state or your designated Beneficiary's state offers a 529 plan, you may want to consider what, if any, potential state income tax or other benefits it offers before investing. State tax or other benefits should be one of many factors considered prior to making an investment decision. Please consult with your financial, tax, or other adviser about how these state benefits, if any, may apply to your specific circumstances. You may also contact your state 529 plan or any other 529 college savings plan to learn more about their features. Please contact your financial consultant or call the carrier to obtain a Plan Disclosure Document or prospectus for any of the underlying funds. The Plan Disclosure Document contains complete details on investment objectives, risks, fees, charges, and expenses, as well as more information about municipal fund securities and the underlying investment companies that should be considered before investing. Please read the Plan Disclosure Document carefully prior to investing.