There are a variety of ways to save for post-secondary education costs. Over the years various tax advantaged products have become available for parents, friends, students and more many of these are described here.
There are other options for saving available to everyone which involve, first, the low hanging fruit of reducing costs on budget lines today and, second, looking for "free" money (scholarships, grants, fellowships, etc.). Options that might be out of reach for most average families or more uncertain and unstable include establishing a trust, and investing or refinancing ownership in capital assets such as a business or home. You should specifically inquire with financial professionals about your personal situation on these options.
529 Plans are distinctly designed for saving and growing a fund for a child's post-secondary education, or even K-12 education. Different states offer different plans and have different tax advantages for families that participate in a 529 plan.
When searching for a plan some of the major points to note are - the tax advantages of the plan, fees involved in the plan, minimum start costs, minimum ongoing contributions needed, performance of the plan, and state residency and spending requirements.
529 Pans can be used for a broad range of educational expenses, including many vocational or technical schools.
Tax advantaged education savings plans. Used independent of, or with, a 529 plan - typically as a supplement to 529 plans. Have different and lower caps of contribution than 529, as of 2024 - $2,000. Some income restrictions. Look for the name Coverdell Education Savings Account or the abbreviation "ESA."
To find ESAs check with your financial institution (Credit Union or Bank), or look at options at other financial institutions. You can use the SLCL provided resource Weiss Financial Ratings Series Online to find evaluate these institutions' financial stability.
The Uniform Gift to Minors Act (UGMA) and Uniform Transfer to Minors Act (UTMA) established guidelines for the creation of custodial accounts for children that transfer to a child when they come of age, typically 18 or 21. These accounts are not tax-advantaged like you might see in the other options such as 529 plans. These accounts have no spending restrictions, but might have an impact on financial aid.
Check with your financial institution or personal finance advisor for information on establishment of these types of accounts.
This guide does not constitute any type of individual financial advice, tax advice, guidance, or endorsement. You are encouraged to consider your own financial situation and needs, continue your own research, and engage in your own ongoing financial education and when necessary contact and consult with appropriate financial professionals.
This guide is not individual savings, investment, tax, or financial advice.