College is a good investment for your child's future that will open doors to unlimited opportunities. However, finding a college savings plan that fits your every need can be overwhelming. There are many factors to consider. Depending on the type of college essay writer your child will be attending, you can estimate the tuition fees. Private colleges are far more expensive than state schools. There are many types of investments accounts and each comes with its own features, benefits and rules. There will always be advantages and disadvantages even for the most popular plans and you must find a way to benefit from their savings account offer.
529 College Savings Plan
Legally known as "qualified tuition plans," the best thing about this type of account is that you can let your money grow without taxes. You only pay a normal income tax for the money you deposit. After that, you don't pay any taxes for the investments' earnings or if you withdraw money to pay for college. On a long term, this tax-free plan will save you thousands of dollars. Any family can invest in the 529 plan, regardless of their income. The money in the account can be used at any accredited college or university in the country. Keep in mind that if you don't use the money for education purposes, you will pay heavy penalties.
Prepaid Tuition Plans
These college savings plans allow you to pay for your child's future college tuition at present prices. This plan gives you the opportunity to prepay a part of the college costs or, if you already have enough money, you can pay the entire four-year tuition fee now, even though your child won't be attending college years from now. These plans are a variation of the popular 529 plans, but they're risk-free. You can't lose the money invested because tuitions have already been paid. However, these plans are administered by individual states and only 19 states currently offer prepaid savings plans.
Coverdell Education Savings Account
The Coverdell Education Savings Account, or ESA, is a tax-advantaged investment that encourages savings to cover future college expenses. The money grows tax-free and you are not taxed if you make a withdrawal, as long as you use the money for education related expenses. One of the great advantages of the ESA plan is that the money can be used for pre-college expenses as well as college education and beyond, until the age of 30. You can use the money to buy a variety of education related items, such as books, after-school programs, tutoring or home computers. The downside is that there are income boundaries and you can't contribute with more than $2,000 a year per child. There are also some age restrictions.
This type of financial account can be set up for a particular beneficiary, in this case your child. The account is opened in your child's name and until your child reaches legal adulthood, you are the custodian of the account and therefore administer the investments. It is very easy to set up, you can do it at any bank and you can deposit as much as you want. However, earnings are taxed annually and at each withdrawal. Once your child reaches the legal age, you have no control over the money.