Saving for your child’s education can be stressful. School can be expensive, whether it is primary school, high school, or college. Parents have some options open to them and can set up education funds plans RESP. This allows them to save money while enjoying the benefits of certain plans. Four kinds of savings plans include the following.
1. Coverdell Education Savings Account
These plans are unique in the fact that they can be used from elementary school through college. In some states, even preschool is included, but this is not a set use. There is a contribution limit each year of $2000, but the account does not get taxes while it is in the fund or when it is distributed. Plan owners can determine how the investment is allocated and change it at any time. Once the student turns 18 years old, control of the plan is turned over and the student can manage what is done with it.
2. 529 College Savings Plan
These savings plans are probably the most well-known. Unlike some of the other options, this plan can only be used for higher education. Like the Coverdell plan, the account does not accrue tax and it is not taxed when it is disbursed. The contribution limit is much higher for this kind of plan. The limit varies, but it ranges from $100k to $350K. The account holder can make some changes to the portfolio, but these changes are limited to only twice per year. Furthermore, the plan is always controlled by the parent. The student is not given control over the account at any time.
3. UGMA Custodial Account
While this account is not specifically for education savings, it can be used to make investments for minors. This account is great to make contributions for minors and can be used on any expense. Furthermore, the parent does not own the account, the minor does and thus has an impact on financial aid qualifications in the future. There are no restrictions on the distribution of the fund and once the child reaches adulthood, they can cash it out at any time.
4. Heritage Education Savings Plan
Heritage offers a unique plan to be used internationally. It is managed by a Canadian Corporation and can be used anywhere in the world. The plan gives a return on investment that is higher than some other options. It also allows the plan to be transferred to another child under certain conditions. This savings plan is a division of Heritage Financial Group Ltd., which is one of the largest contributors of education fund plans. It provides a safe place to invest money ear-marked for education.
Education funds plans can be a little confusion. Before investing to save for a child’s education, the custodian should research the options and choose what will meet their needs best. There are various factors that should be taken into consideration when choosing a Heritage RESP plan, including who owns the plan and how it can be used for the student.