Looking for Different Ways to Save for College Instead of a 529 Plan?
There are many reasons why you might not want to go with a 529 savings plan for your kid’s college fund. Maybe you’re not excited about putting all your money into a ‘college-only’ bucket. Or perhaps your state doesn’t offer great tax breaks for 529 plans. No worries, there are other options out there!
First, you could consider a Coverdell Education Savings Account (ESA), which is a bit like a 529’s smaller sibling. If your child is under 18 and your income falls within certain limits, you can contribute up to $2,000 each year per child. This becomes your child’s money and must be spent by age 30, or there will be taxes and penalties. But, the neat part is, you can use ESA funds not just for college, but also for primary and secondary education expenses – handy if you’re thinking of private schooling!
Another strategy is to start a Roth IRA in your kid’s name. Yes, typically you might not want to raid retirement savings for college costs, but this is a different setup. If your child earns at least $5,500 a year, for example from a part-time job, you could contribute that amount to their Roth. Then, they can take it out for college when needed. If they don’t end up needing the money for school, they have a nice nest egg for retirement or a down payment on a house!
Lastly, investing in the stock market is another option. A Florida-based advisor, Margaret McDowell, suggests choosing low volatility ETFs and dividend-paying blue-chip stocks. Just remember, investing always comes with a risk, so it’s smart to keep these investments in your name. The best part? If your child sails through high school and wins a full scholarship, or chooses a different path, you can use this money as you please.
So, those are a few alternatives to the 529 plan for college savings. Just choose the one that works best for you and your child’s future. If you’re looking for even more strategies to get your kids through college without breaking the bank, keep exploring. There’s always a new strategy around the corner!