Investing for College

Setting aside funds for higher education can create a brighter future for you or a loved one, but deciding how to go about investing can leave you guessing. If you are setting aside funds specifically for education - then with any account growth vehicles like 529 college savings plans and Coverdell Education Savings accounts offer tax-deferred or even tax-free growth so you can maximize your potential savings. Whichever approach you select, it's important to remember that starting early and contributing even just a little bit can help you reach your goals faster.

There are a number of choices available for those seeking tax-efficient accounts specific education. These include 529 college savings plans, Coverdell Education Savings accounts, and UGMA/UTMA Custodial accounts.

529 plans

Sponsored by individual states, these college savings plans offer a level of flexibility and potential tax advantages that can make them a great choice for the right investor. Benefits of a 529 plan vary from state to state.

Coverdell education savings accounts

These accounts offer federal tax-free earnings and withdrawals on qualified expenses such as tuition, books, computers, and room & board. While 529 Plans are used exclusively for college. Coverdell Education Savings Accounts (ESAs) can be used for elementary and secondary schooling in addition to college. Additionally, there are no minimum contributions, and account owners can contribute up to $2,000 per child per year. See if Coverdell ESAs are right for you by exploring more account details.

UGMA/UTMA custodial accounts

Custodial accounts provide a way to build assets for your children or loved ones future, and let you manage a minor's assets for their benefit. As you build a portfolio, with or without assets from the minor, you will be the guardian of the account, managing it until the minor reaches the age of majority. From the start, the account will be held under the minor's name and Social Security Number. Once they are old enough they will assume control of all assets.

Learn more about the tax benefits and details of custodial accounts.

529 prepaid tuition plans

Some states offer an alternate 529 plan that allows you to prepay tomorrow's college tuition at today's prices to attend an in-state college. Some plans cover tuition, fees, and room and board, while others only cover tuition and fees.