3 Ways to Save for College

By guest contributor Sallie Mae^®

As you start to save for college, consider three of the most popular ways to set up a college fund: 529 College Savings Plans, UGMA/UTMAs, and Education Savings Accounts (ESAs).

Each one offers different features and benefits. Other methods include high-yield savings accounts, life insurance, and mutual funds. A financial advisor can help you choose the best one for your needs.

529 College Savings Plan

State-sponsored 529 plans are one of the most popular ways to save for college. You can invest in any state’s 529 plan regardless of your residence, but check with your own state’s plan first. Most offer special tax advantages for residents. 529 plans give you additional benefits such as:

• The account owner has full control over the account, so you can be sure the money is used for college.
• Your assets can be used for any qualified higher education expense, including tuition, fees, and certain room and board costs.
• Earnings grow tax deferred and are free from federal income tax when used for qualified higher education expenses.¹
• Most plans offer gifting programs, which allow friends and family to celebrate milestones by making contributions directly into your account.

UGMA/UTMA

An UGMA/UTMA (which stands for The Uniform Gift to Minors Act/Uniform Transfers to Minors Act) is a custodial account usually set up at a bank. The assets in the account are designated for the child, but do not have to be used solely on education. Benefits include:

• Flexibility – you choose how you want to invest the money, with options including mutual funds, stocks, bonds, or CDs.
• Control – the money is still yours until the child reaches the age of (continue reading College Savings Plans: Ways to Save by Sallie Mae)