The third biggest financial goal for a family is saving for college. Buying a house and retiring are the first two goals. With the increase in the cost of higher education, parents try to spend money on education as soon as a child is born. If you want to get the best education planning service then have a peak at this website.
There are two federal and state sponsorship packages that make saving money for college easier: Coverdell and the 529 plan. Coverdell Education savings accounts
Coverdell is sponsored by a federal plan that lets you raise funds for tuition fees. This fee includes tuition, fees, books and supplies, as well as room and board.
Annual contributions are not taxed, meaning they are tax-free as long as they are used to pay for eligible tuition fees. There is a limit to the number of annual contributions that can be made each year.
Coverdell is created as a custody account created by a parent or other adult to pay for certain recipient education costs. The child must be under 18 years of age to create an account. All credits must be used within 30 days of the child’s 30th birthday.
Any financial institution that deals with an IRA can help you set up Coverdell, including banks, investment firms, and brokerage firms. Coverdell is like an IRA because it’s an account. You can invest in any investment you want on your account – stocks, bonds, mutual funds and certificates of deposit are just a few options.
You can create as many Coverdell kids accounts as you want. For example, you can have one account at your local bank and another with a broker. There are many costs associated with some packages. Make sure some account management fees don’t cancel your total refund.
If your child chooses not to go to college, they will lose a lot of money. When he is 30 years old, he must withdraw the balance within 30 days. Any funds withdrawn that are not used towards eligible tuition fees will be taxed and a 10% IRS fine will be applied.
If your child chooses not to go to college, that doesn’t mean he or she isn’t his child. The child can take the entire balance into other Coverdell packages for other family members, including siblings, nieces, and sons and daughters.