Most families with kids today are talking about next year’s education and how this will be handled with a pandemic. Even before COVID, there was a burgeoning debt problem in the US and centered squarely on the backs of our college graduates. If you simply search the internet using the phrase “college debt levels today” the amount owed is over 1.5 trillion. To give that number some perspective this is more than all the auto loans and credit card debt combined in America. As staggering as this sounds the overall trend is not changing.
When you educate yourself on the cost of 4 years of college expenses you might feel overwhelmed on trying to save that much money. Remember that your children have their entire working careers to pay off this investment in themselves. But saving even a small amount, explaining to your kids that you are putting money away for their future education is such a great way to teach your values to your children. Just remember to take care of you and your own retirement first because there are no options to borrow money for retirement.
So how do you put this money to work? Start by educating yourself…there are a lot of great programs out there like UGMAs, UTMAs, Education IRAs or now Coverdell ESAs. My preferred way to help clients save are with 529 savings programs. There is a lot of misinformation on 529 plans and for some reason when you say “Illinois sponsored” people are about ready to walk out the of the room. So lets talk quickly about them…
- If you live in Illinois and pay state income taxes, you can contribute to the Illinois sponsored plan and receive a deduction on your taxes.
- If you contribute to the Illinois a sponsored plan, that does not mean you can’t use the money for out of state universities.
- Just because they are state sponsored that doesn’t mean if the state goes bankrupt that you lose this money.
- Finally, if you invest this money wisely and have growth on these savings those earnings are tax free if used for qualified expenses.
Please contact our office to see how planning for higher education can help your overall financial plan.