Wealth management Funding an education
Paying for college and other school costs may be one of the most important investments you’ll ever make. The good news is you have options and a 529 plan is a great place to start.
How to save for education
Every great education plan begins with a few key questions. Do you want your child or grandchild to graduate debt-free, or pay for part of the cost themselves? What sources of funding can you draw on? How much time do you have to save?
Your answers shape your strategy. And whether you're planning for elementary school, college or graduate school, the sooner you start, the better prepared you'll be.
529 plans
What is a 529 plan?
If you have time to plan ahead, a 529 plan is one of the smartest ways to save. A 529 Education Savings Plan from U.S. Bancorp Advisors gives you a tax-advantaged way to cover costs from primary school through college.
How does a 529 plan work?
- Your contributions are made with after-tax income, but your gains aren't subject to federal tax.
- There's no upper income limit, so you can contribute regardless of how much you earn.
- Withdrawals for qualified education expenses are exempt from federal taxes.
- Leftover funds can go toward another family member's qualified education expenses.
- Some states offer additional tax incentives for savings.
Custodial accounts
Looking for more flexibility in how you fund a child's future? A custodial account is another way to invest on their behalf.
Custodial accounts, like those under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA), let you contribute funds and manage investments as the custodian, while the minor is the legal owner of the assets. Once the child reaches the age of majority, which varies by state, they get full control of the account.
Unlike a 529 plan, a custodial account isn’t limited to education expenses. The assets can support a range of needs as the child grows, giving you room to adapt as priorities shift. You can set up a custodial account with a financial advisor, or you can manage it yourself with a self-directed investing account.
Additional sources of funding
Working with a shorter timeframe? Start with federal student loans, grants and private student loans. Compare what you're likely to receive against the estimated cost of education to see how much more you'll need.
Asset secured financing
Liquid asset secured financing is a flexible line of credit from U.S. Bank, secured by assets in your investment portfolio. A financial advisor or banker can help you decide if it's the right fit.
Using the equity in your home
If you own a home, a home equity loan or line of credit can help cover the gap. In some cases, borrowing against your home's value may cost less than a private education loan.
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Disclosures
Disclosures
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