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Many current or expectant parents have concerns about the high cost of a college education. While saving for college is one of the most important things a parent can do to help secure their child’s future it can feel daunting when one considers the rising cost of college. As college expenses have risen considerably over the years, many families find it difficult to afford without incurring significant debt. However, there are ways to achieve your college saving goals.


The first and most important step in creating a college fund is to start saving as early as possible with regular, systematic additions to the plan. Determining which type of account to use is a key consideration.


The most common types of accounts are 529 Plans, Coverdell educational savings accounts and custodial accounts or Uniform Gift to Minors Act accounts.

Coverdell accounts have a maximum contribution of $2,000 annually and a contribution can only be made if the contributor’s income is under a certain threshold. For 529 accounts, contribution limits are established federally while tax benefits differ by state. The funds in both Coverdell and 529 accounts can only be used for qualified educational expenses without a potential tax penalty. A custodial account, also called a Uniform Gift to Minors Act account, can be used for any expense that benefits the minor and there are no contribution limits. This article from Nationwide more fully details these types of accounts.


A next step in saving for college is to be aware of how different accounts affect an application for financial aid. The FAFSA form is required for such an application and consideration is given to account assets in the child’s name available to assist them in paying for college, as well as the parent’s assets. Custodial accounts count as an asset of the child, which may negatively impact their ability to get financial aid than an asset in the name of a parent, such as a 529 owned by the parent where the child is the beneficiary. Working with a financial advisor is an effective way to help you make the proper choice for your family. 


Saving for a child’s college education does not have to be an overwhelming task. With a little research and planning, it is possible for parents to feel confident that their child’s educational needs will be met.


Securities and Investment Advisory Services offered through Essex Financial Services, Inc., a Registered Investment Advisor, Member FINRA, SIPC.  A subsidiary of Essex Savings Bank. The securities and insurance products offered through Essex Financial Services, Inc. are not a deposit of, or other obligation of, or guaranteed by any bank, or an affiliate of any bank, are not insured by the FDIC or any other agency of the United States, the Bank or an affiliate of the bank and involve investment risk, including the possibility of a loss of the principal amount invested.