Back-to School season not only means buying school supplies for the younger kids, but it can mean tens of thousands of dollars for college-age kids. It’s important to have some money saving strategies in place for that fact of life.
Sara Parker from Utah Central Credit Union shares some easy ways to save.
Where did the summer go? Next week Salt Lake City schools open and the week after, most of the schools around the valley will welcome students back for the new year.
And if you’re a parent you know what that means in terms of all the things that kids need for school including supplies, back packs, special club fees, athletic programs, clothes, shoes and on and on.
One thing you may not be thinking about or preparing for is the day they will go off to college.
Wherever you are in life, saving and planning for college is going to be a major investment.
The annual cost to attend the University of Utah is $14,552 – which includes, books, tuition, fees, room and board. In four years, the total climbs to $50,300. The cost to attend BYU is about the same as the U and slightly less for Utah State University. And if you have more than one child, these financial obligations can add up fast.(Source CNNMoney)
There are 4 options:
1. A 529 College Plan
3. Coverdale Education Savings Account
4. A Baby Wealth CD
529 College Plans are becoming more and more popular and Utah has one of the best. Financial guru Clark Howard called Utah’s 529 plan the “nation’s finest” and Morningstar gave the state program a top rating. A 529 plan let’s you set aside funds for college and the benefits are very attractive:
· The money is not taxed
· You can earn up to a 5% state income tax credit
· low administrative fees – some of the lowest in the nation
· 12 investment options
· Flexibility in transferring or withdrawing the money
· No minimum deposit or income limitation
The program was established by the state legislature in 1996 and currently holds $4 billion in assets with more than 187,000 accounts. You can find more information by going to www.uesp.org.
Traditional savings accounts are certainly a safe option. Safer than the stock market or other investment strategies because you won’t lose your principle. Currently, interest rates vary from 1-2% but if you start putting $100 a month in a savings account when your child is born you would have about $25,000 by the time they turn 18. This would cover two years of college tuition at all of Utah’s major universities and be more than enough to cover most if not all of their education at a community colleges or another in-state institution of higher education.
The Coverdale Education Savings Account is a program similar to the 529 plans, in that it’s a way for parents to put aside money for their child’s college education.
· The maximum contribution for one year is $2,000.
· All the contributions in an ESA will eventually be distributed to your child if not used for college.
· The account is not be subject to federal income taxes
· Generally, withdrawals from the account will be completely tax-free as well.
· There’s an income restriction
And the Baby Wealth CD is a product uniquely offered by Utah Central Credit Union. And is a great way for a grandparent, relative or friend to contribute to your child’s educational future by opening a CD or a Money Market account.
Both will earn interest over time and are another investment tool for helping your child realize his or her dream of a college education.
To learn more, or to find answers to your other financial questions, visit www.utahcentral.com