How to save for education
You have options when it comes to covering educational expenses for yourself, your kids, or others you care about. The sooner you start planning for elementary, secondary, college, or graduate school expenses, the better prepared you’ll be.
Your plan starts with identifying your education savings goals and timeframe. Would you like to cover your child’s or grandchild’s college expenses so they can graduate debt free, or do you expect them to pay for a portion of the cost? What are your potential sources of funding? How much time do you have to build education savings?
Education savings plans
If you have time to plan in advance, consider education savings plans that offer tax benefits. A 529 Education Savings Plan is one of the best ways to put aside funds to pay for education expenses from primary school through college.
A 529 Plan by U.S. Bancorp Investments can give you a tax-advantaged education savings account that can be used to pay for elementary and high school expenses, as well as college or university costs.
- Your contributions to the plan are made with after-tax income, however your gains are not subject to federal tax
- Money you take out to pay for qualified education expenses is exempt from federal taxes
- Some states also offer tax incentives for savings
- You can contribute to a 529 plan regardless of how much you earn – there is no upper income limit for tax-advantaged education savings
- If there are funds left over in the account after paying for one family member’s education, the remainder can be used to pay for qualified educational expenses of another family member
Additional sources of funding
If your timeframe is short, your first step is to look into Federal student loans, grants, and private student loans. Evaluate the amount of funding you’re likely to receive compared with the estimated cost of education to see how much more you will need to cover expenses.