One of the biggest milestones for parents is when their child graduates from college. I discussed in an earlier blog post the importance of three documents: a Durable Power of Attorney, a Durable Power of Health and Living Will. I hope many readers downloaded the Durable Power of Health and Living Will from the Internet and had the documents signed by two witnesses. If you didn’t, take the time now to protect your child.
After Graduation, what is next? Your 18 or 19-year-old loved ones will begin thinking about a career. Today’s graduate does not have the same job opportunities that you or your parents had. You may remember the day that many graduates just wanted a steady job they liked that offered benefits, a retirement plan and a potential future, while other graduates chose to pursue a four year degree, allowing for careers as teachers, professors, engineers or in computer sciences, business or even law. In case you haven’t noticed, there are fewer vocational schools and more two year colleges, which offer degrees in special fields. Now comes the question, "How do you pay for it?"
Higher education is expensive. I have had interns for the past 10 years serving in some capacity in my offices and I am amazed at how many owe anywhere from $20,000 to 80,000 in student loans.
When families find out how expensive public and private educations is, it makes sense to have a plan for their children’s education future. It is possible that these costs could exceed $100,000 if they attend college for four to five years. Parents and close relatives want their graduate to have the best education that will lead them to a successful career
Some parents begin saving for college in 529 plans. 529 education savings plans are operated by a state or educational institution. These plans are designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996. As long as the plan satisfies a few basic requirements, the federal tax law provides special tax benefits to family members.
Another Savings Plan to consider is a Coverdell Education Savings Account. Any family member or significant person in their life may send checks into this account up to $2,000 a year for the child’s benefit from birth through age 18. One of the major differences between the 529 plan and The Coverdell Savings Plan is that the Coverdell Plan can be used to pay qualified elementary or secondary expenses for public, private and religious institutions as well as tuition, room, board, books, computer, lab fees and even tutors. You could open the Coverdell Plan with $1,000 contributing as little as $90 per month for the first year, and any amount up to the $2,000 after the first year. All funds must be distributed by age 30. Coverdell also may not count against financial aid depending on who owns it.
Lastly, a simple way to begin savings for College is to open a Whole Life Youth Policy, which will allow a anyone to begin a Cash Savings Program for a child. The child will be able to use the cash value tax free when they are ready to go to college, get married or begin a training program.
To find out more about how to fund education for your loved ones, email me at email@example.com .
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