The key to knowledge is education. Being a first-generation immigrant, you truly understand the value of an education and the scarcity of knowledge.
When it was time for you to start thinking about college, you couldn’t lean on your parents. Your parents perhaps had an education in a different country, so they didn’t know how to navigate the higher education system in this country. You had to be resourceful and scavenge for knowledge that your peers seemed to “just know.” Now that you have children and know FAFSA is not going to come to your child’s rescue as it did for you. What do you do?
It’s never too early to get started. You can actually start preparing for your child’s education as soon as they receive their social security number. The sooner you start, the better prepared you and your child will be. You want to soak up as much knowledge as possible as your child enters the education system. You can do this by being proactively involved in your child’s education. Create relationships with the school professionals as well as other parents. This will put you at the forefront of accessing knowledge towards higher education and opportunities for your child.
The elephant in the room is, of course knowledge is power but money pays the bills. How do you ensure you and your child are financially prepared? What if your child doesn’t go to a traditional college? Everyone’s approach towards education is different but you want to ensure you are maximizing the options you have available.
A powerful vehicle to start saving for an education is a 529 college savings plan. This can be for college, private school, or even many trade schools.
529 plan is a gift that keeps on giving! There are no income limits so you do not have to worry about how much money you are making. However, there is a lifetime contribution limit depending on the state. This lifetime limit can be as low as $235,000 to as high as $550,000. Below are some of the benefits:
- Many states have an annual deduction for amounts contributed in a 529 plan
- You do not pay any taxes on the withdrawal amounts as long as they are used for education. This includes tuition, books, supplies, and even room and board
- You can change the beneficiary if monies are left over after your child’s education. The new beneficiary can be yourself, another child, or even a grandchild!
- If the account has been open for 15 years, you can convert $35,000 of the balance to a Roth IRA
There are other options such as Prepaid Tuition Plans, Coverdell Education Savings Accounts, or custodial accounts such as UTMA/UGMA. They can be a great fit for you depending on your goals and circumstances. For example, only 9 states currently offer prepaid tuition plans but if you’re a resident of that state, this could be an attractive option for you. This plan allows you to pay for tuition at today’s rates instead of the actual rate when your child will be attending college.
If you haven’t started preparing for your child’s education yet, this is your cue to get started! You have access to the tools available to pave the foundation for your child’s education. Start doing some research on your own to build your knowledge base. If you have questions, reach out to a Certified Financial Planner to help you understand which education planning vehicle makes the most sense for you and your family!
All written content is for information purposes only. Opinions expressed herein are solely those of Zenith, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.