Investing in Your Child’s Education
Education is important to many people. After all, education provides more opportunities, regardless of whether you go to college, learn independently, or study a trade. Parents often plan to support their children at least part of the way through their adult education, but far too few people know that these options are available for investing in their child’s future.
529 College Savings Plans
By far the most popular and well-known way to invest for college, the 529 college savings plan is designed to help parents earn interest on money they stash away for their children’s future. The 529 plan is tax-deferred, and withdrawals can be tax-exempt when done appropriately. Funds from this account can go toward a child’s tuition, loan payments, and even costs associated with an apprenticeship. These kinds of plans are common because they are easy to understand and use, which makes them a great option for parents who do not have a ton of time to keep track of investments.
Some parents or grandparents like to buy their children stock in major companies while they are young. This allows the stock plenty of time to grow and provide a good return on investment. Companies like PepsiCo, Starbucks, and Apple are just a few options, but you can choose any stock you like to invest in. Putting money into a stock portfolio is always risky, and when you are betting your child’s education on the market, it becomes even more risky. However, a supplemental investment in a stock can be a great way to teach your child about investing while they have no real risk. Even if you do not want to invest long-term in the stock market, this could be an educational way to save a little bit for textbooks or a graduation present.
Federal savings bonds work like a loan to the government. You can purchase bonds of varying amounts and types that are guaranteed by the government to give a return in the future. Depending on the type of bond, the return could be double, or it could be some other rate. Since bonds are inexpensive, easy to purchase, and low-risk, many people prefer to invest this way for their children’s education.
When in doubt, a solid savings account is a good investment for your child’s future. There are many different accounts to choose from with different interest rates, and the rates on accounts often fluctuate. However, since a savings account is not an investment account, it is the safest option of all for storing your money.
Education is important, and many parents understand that education is not cheap. To help your child in the future, make sure to look into the many investment options available.
Representatives do not provide tax and/or legal advice. Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax and accounting advisors as appropriate.
Ben Soccodato is a registered representative of and offer securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. www.SIPC.org 6 Corporate Drive, Shelton, CT 06484, Tel: 203-513-6000