Other than one’s comfortable retirement, the most challenging financial objective is often accumulating the monies necessary to ensure the education of a child/children. Unfortunately, and all too often, discussion between advisors and clients center on the type of account that should be utilized – 529 Plan, UTMA, UGMA 2503 c trust etc.
Truth be told, the most prudent step, initially, is becoming familiar with the different paths (Community Colleges, Vocational/Technical Schools, Major Colleges and Universities) that can be used in the pursuit of a higher education – areas of recognition, tuition expenses, residential accommodations, academic requirements for acceptance, financial assistance programs, etc.). After all, doing so, will result in a “short list” of school whose characteristics are aligned with the interest (s) of the student and the financial resources the family can dedicate to the education of the child/children.
This is especially important when a family might be seeking to educate “multiples” (twins, triplets, etc.). However, all too often parents “reverse engineer college” waiting to learn where their child/children have been accepted and then figuring it (how to address tuition expense, etc.) out.
Becoming familiar with the different paths (Community Colleges, Vocational/Technical Schools, Major Colleges and Universities) that can be used in the pursuit of a higher education allow parent and advisors to gain insight into the expenses associated with college in today’s dollars – more importantly, the expense at the time the child will begin his/her college career and each year thereafter.
In turn, parents and advisors can work collaboratively to forecast educational expenses and determine the best manner in which to fund the objective – systematic monthly savings, lump sum contributions or, perhaps, a combination of both.
Only then can the type of account that should be utilized (529 Plan, UTMA, UGMA 2503 c trust etc.) be determined as one takes into consideration the features and characteristics (contribution options, tax efficiency, investment flexibility, impact on financial aid programs) of available options.
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