What Are Educational Savings Accounts?

Financing is one of the most important things that need to be considered when a parent begins thinking about their son or daughter’s college education.  Unfortunately, far too many parents make this item last on their list in terms of their priorities.  If you are a parent, you owe it to your child and yourself to plan ahead so that you can help your child cover the cost of their education.  An educational savings account is one of the ways that you can do this.

What is an Educational Savings Account?  An educational savings account is a savings account that you can open for any child under the age of 18.  You can open up this type of account at your local bank.  These types of accounts allow you to contribute up to $2,000 per year, per child.  This includes contributions made by your grandparents, friends, or other family members.  The best thing about this type of account is that the money can be withdrawn tax-free as long as it is being used for educational purposes.

Tuition, fees, supplies, textbooks, room and board costs, etc. are all considered educational expenses.  If for some reason, you don’t use all the funds for your child, there are some other options that are available to you.  1) You can elect to roll over the funds to another son or daughter who is under 18. 2) You can leave the funds in the account and allow your son or daughter to withdrawn them up until the age of 30 (however, tax penalties will be involved)

The funds contributed to these accounts are not tax deductible; however it is a great way to begin saving money and investing in your child’s (or children’s) future.  If you try to contribute the maximum amount ($2,000) each year from the time your child is born, when it’s time for college, you should have a nice nest egg to help you cover their educational expenses.

Even if the funds saved in this account won’t cover your entire son or daughter’s educational costs; it’s possible that he or she may be fortunate enough to qualify for scholarship or other sources of financial aid.  By taking this approach, you’ve saved yourself from the worry that goes along with providing for your family and affording college tuition.

Another option for you is to sign up for programs like Upromise.  Upromise allows you to subsidize or finance your contributions with donations from corporate sponsors.  This is their way of thanking you for purchasing their service.  Every advantage that you can give yourself during this process will be helpful.

Every edge that you can give yourself when it comes to affording college tuition is worth having.  College tuition prices are rising at staggering rates and college degrees are becoming more critical in order to obtain gainful employment after graduation. This means that a college degree is more critical for your children than in any past generation.

Take this time to learn more about educational savings account and set one up if you haven’t done so already.  Inform friends and family that any monetary gifts that they plan to give you child would be better appreciated if they invest in your child’s future, rather than their now.  You can also encourage your friends and family to sign up their credit cards with Upromise in order to provide a little extra bump in donations to your child’s college savings account.  These little steps can truly add up over the course of 18 years.  You just might discover that the investment you are making now will cover the cost of your child’s tuition in the future.

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Lauren Anderson is a certified school counselor who's passionate about helping students all over the world successfully transition from high school to college! After spending 6 years as a business professional, she obtained her Master’s degree in School Counseling and now spends her spare time helping students.

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