Along with leaves changing color and cooler temperatures, autumn sees the return of school. While it’s easy to get caught up in the immediate necessity of buying new supplies and clothes, it’s also a great time to consider your kid’s educational future – and how you’re going to pay for it. In a nationwide effort to raise awareness about saving for higher education, September has been designated as College Savings Month.
The most important thing you can do is make a plan. Navigating the maze of college scholarships, financial aid and student loans isn’t easy, and the overall cost may be so overwhelming that you’re tempted to do nothing. Instead, set a personal goal, such as saving for two years of college, and try to remember that saving for any part of your future college student’s expenses will be a huge bonus to them. Start with something manageable now to help save money and frustration in the future. There’s no guarantee that your child will get any kind of scholarship, so try to think of that only as a potential opportunity and take control of what you can.
There’s no doubt that it’s less expensive to save than it is to borrow. One of the best ways to save money for future education expenses like tuition, fees, room and board, books, and supplies is through Kentucky’s official 529 college savings plan. Managed by TIAA-CREF Tuition Financing, Inc., the Kentucky Education Savings Plan Trust (KESPT) was created more than 25 years ago to make it easy and affordable for the average family to plan ahead for the cost of attending college. When you contribute to a 529 plan, any account earnings are federal and state income tax-free until withdrawn. Any distributions used to pay for qualified higher education expenses are also free from federal and state income tax.
KESPT offers six options that vary in their investment strategy and degree of risk, allowing you to select an option or combination of options to fit your needs. The money in a 529 account can be used at nearly any public or private college or university, graduate or post-graduate school, or community college, as well as certain proprietary and vocational schools. If your child decides not to attend college, the money is not lost. You can change the account’s beneficiary to certain other family members, including yourself, although non-qualified withdrawals are subject to federal taxes, state taxes and an additional 10 percent federal tax. If your child gets a scholarship, you can withdraw the funds from your account up to the amount of the scholarship without penalty or additional tax.
For more information about KESPT, visit kysaves.com or call toll-free 1-877-598-7878.
It’s never too early (or too late) to make a higher education plan. Studies have shown that children are six to seven times more likely to attend college when there is money saved for that purpose. At Bunch & Brock, we know it can be hard to put money aside, but with more than 35 years of experience in the state of Kentucky, we have helped many people develop the best plan for their situation. To get started, or if you have any questions about this topic, call us at 859-254-5522 or fill out this online form.
