When it comes to investing for college savings, parents have a lot of choices. Here’s some info on the more popular options. 529 plans are a go-to for most families because they can be opened on-line, are tax-advantaged college savings plans that can be used to cover qualified K-12 costs, apprenticeships, and trade schools. Most states have their own version of the 529 like the NC 529 in North Carolina and the Future Scholar 529 plan in South Carolina. And investors can have multiple plans regardless of where they live.
A Custodial Account offers parents and grandparents a way of giving money and investments to a child. These accounts can be opened at a bank or brokerage firm then the parent or other adult will gift money to the account for the child which can be invested in stocks and bonds or even real estate. The custodian of the account will control how the money is invested and spent but the money must be used to benefit the minor. Once the child reaches the age of maturity, which varies from age 18 to 25 depending on the state, the child will then control the account.
Any parent or child can invest for college savings by contributing to a Roth IRA. There is no age requirement so even a 12-year-old who earned money by doing chores at home or babysitting for the neighbors can contribute to an account opened for them by their parent or guardian. The money can be withdrawn from the account tax-free to pay for college expenses.
If you need help, Alloy Wealth Management is here to help take the stress out of investing for college savings. Call 800-689-3935 to speak with one of our fiduciaries and get answers to your questions about the various college savings options.