Creating and Managing an Educational Savings Account

When it comes to your child’s education, you should be thinking about putting together the money they will need for college at birth. College tuition is only going to go up over the next seventeen to eighteen years, and you want to have a plan in place to pay for your child’s education. Here’s a simple option you can use to get started.You can begin by opening an educational savings account. You can deposit up to $2000 annually per child into such an account. This is a combined total, so any money from grandparents or other interested parties is placed in this account and cannot exceed $2000 a year. The money is not pre-tax, but it can be withdrawn tax-free as long as it is spent on educational expenses.Educational expenses are determined to be books, fees, supplies, tuition, room and board, and anything directly associated with your child’s education as long as he or she is at least a part time student.If, for some reason, all of the funds in the account are not used, you can have the account pay out to the beneficiary up to age thirty. Penalties and taxes will attach to this accommodation. Your other alternative, should you not use up all the educational funds, is to roll over the account to the next child coming of college age.If you begin this sort of plan upon the birth of your child, you should realize more than enough growth from your investment to put your child through school and tap out the rest of the fund as a fine graduation present. While the money you deposit into this type of fund is not tax- deductible, its growth is. As long as the funds are all used for educational expenses, none of the profit your account realizes through investment is taxable. This is a nice way to prepare for your child’s future.There are credit card programs that pay bonuses into children’s college funds as a promotion and often companies and corporations will make donations into an employee’s child’s fund as well. Anything you can do to help your child’s education fund grow now will be a savings and security for the future.To help you gainfully secure that future, you might want to talk to a financial planner about preparing the way for your child’s college education. It is never too early to start saving for your child’s future.