The holidays are here and some of you may still be wondering what to buy for the grandkids or special little people in your life. There is nothing like getting them a financial gift that will keep on giving – their adult selves will thank you! And remember, it does not have to be an all our nothing approach. You can balance it out by getting them something fun as well as a financial gift that will help set them up for the future. Below are a few ideas.
Get a head start on your child’s education today. With college costs rising at a historically high rate, it’s never too early to start saving for your child’s education. The average cost to attend college each year is in the tens of thousands. A 529 Plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans (legally known as “qualified tuition plans”) are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. There are two types of 529 plans: prepaid tuition plans and education savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plan. In addition, a group of private colleges and universities sponsor a prepaid tuition plan. Savingforcollege.com allows you to research 529 plans from every state. They provide plan information and tools that help you choose which plan is right for you. You can start one today and track and grow your grandchild’s college savings!
Coverdell Savings Plan
A Coverdell Education Savings Account (ESA) is a tax-advantaged savings account designed to help families save for college and K-12 education expenses. Similar to a 529 plan, investments in a Coverdell ESA grow on a tax-deferred basis and can be withdrawn tax-free to pay for qualified education expenses for a designated beneficiary. Note – the benefit applies not only to qualified higher education expenses, but also to qualified elementary and secondary education expenses. Spencer’s Coverdell Education Savings Account can help you get started.
This is a great option for a grandchild with earned income from a job. An IRA contribution can be an excellent education in the benefits of delayed gratification and compounded growth. Match and contribute to the account what your grandchild earned that year. You can give up to the amount the child earns per year, subject to the annual IRA limit ($6,000 for 2021). For minors, you must open a custodial IRA account, over which you retain control until the beneficiary turns 18. Start a retirement account now for them and they will have their whole life to see that money grow. Spencer’s IRA Accounts can help you get started.
Visit the above links or contact your local Spencer financial center today to learn more. Holidays, birthdays and milestone occasions are all a great time to gift give and make those gifts as meaning and impactful as possible. Your grandchildren will become adults one day and have major expenses to face – let’s help set them up for success today!