College education costs are at an all time high. No wonder smart parents plan to save and invest for their children’s higher education from an early age. Are you a new parent who has already started planning your child’s future? That’s great and the post below offers expert tips on investing for your kid’s college.
Go for Coverdell Account
Investments in Coverdell Account can be banked on for college as well as K-12 private tuition for your child. One of the best parts about this investment option is that here you have an amazing flexibility to select low-cost ETFs or stocks. The withdrawals will be completely tax-exempted for qualifying academic costs. However, there is a yearly contribution limit here which is $2,000 for each child. There is a restriction on income limit of investing parents as well. If you are filing individually, your income can’t be over $110,000. If you are filing jointly, the income can’t be over $220,000.
529 Plan offers tax credits when a parent saves in it for his/her child’s college education. Every American State offers the 529 plan and you are sure to get it in your State. Interestingly, if you are an US citizen going for this plan, you will be able to save in funds of any State. Then, you will be glad to know 529 plan allows tax-free withdrawals and tax-deferred growth. In fact, some States are even flexible to match the funds as per your investment account.
This investment plan is especially for teen kids (minimum 16 years) who have started to earn. If your kid has reached that stage, you can consult Indeed.com for suitable job offers. Now, just because the account will be opened in your kid’s name, it doesn’t mean you can’t deposit anything in the account. In most of the cases, 80% of ROTH IRA investment is deposited by the parents only.