Saving money for your children’s college education can be one of the hardest things to do. As a parent, you have a lot of responsibilities already. You know that helping your son or daughter with college expenses is one of those responsibilities, but it’s often a low priority because college seems like it’s so far off into the future. It’s not. In reality, you have to start saving now if you want any hope of accumulating enough money to offset any shortfall you’ll have from Federal or State aid programs.

4 Reasons To Own an Educational Savings Account

1. Your children get tax-free savings for college. Unlike traditional savings accounts, educational savings accounts (i.e., Coverdell and state 529 plans), give you tax-free savings that you can use for qualified education-related purchased. None of the money you deposit into the savings account is tax deductible, but all future earnings are tax-free. If your child’s college fund grows as expected, this could be a boon to him when he needs it most.
2. You won’t have to worry about future college costs. Trying to scramble around and find money for tuition fees and books is stressful when you don’t have money you can immediately draw on for this purpose. Educational savings accounts eliminate having to borrow from retirement plans since you are planning for future college expenses long before they ever occur. Savings accounts might also eliminate the need to take on expensive loans that have to be repaid by either you or your child. Since student debt is a huge problem in the U.S., giving your child a pass on this alone will give them a head start in life.
3. Your children won’t have to save up for college all by themselves. Putting money away for your children alleviates the responsibility for your child to come up with the money herself. While you might want to teach your child the value of a dollar, and might cringe at the idea of handing “everything” to your child on a silver platter, helping your child with college won’t necessarily spoil him. He’ll learn enough about the real world when he graduates. You could also provide a very generous “matching contribution” for every dollar that your child agrees to contribute to her college fund. In this way, your child gets a “hand up” instead of a “hand out.”
4. It’s a simplified savings plan. Coverdells and 529 college savings plans are simplified savings plans. There’s little reporting that needs to be done beyond the initial setup, and no additional tax forms to file until you take withdrawals (to ensure that income is distributed tax-free). In addition to this, many plans offer a portfolio guidance in the form of pre-made portfolios. You simply select the fund you want to invest in, and your administrator does the rest.