Tags: Investing, Saving, College Savings, Education Planning, Children’s Education

Saving and Investing for Education Planning Success in the United States and Beyond

October 1st 2020

investing, saving, college savings, education planning, children’s education

Education Planning for you or your children’s education is one of the most important ventures in your life. You want to give yourself or your kids a good education and we know that college education is expensive. One of the obvious steps is that you need savings for investing. So to make your needs happen, we plan financially. Start your education planning ahead of time; and be ready for the moment you need the savings  for college or other education plans.


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So for example, you’ll need to take into consideration how much time until the start date you have, and the investment returns needed to achieve the required capital; and if your family qualifies for any type of financial aid.


You need to have money in your banking account that you can allocate to your investment account. I’ll give you tips to save for education planning effectively.


It’s important to start saving as early as you can to reduce the initial funds required. The reason you start saving young is due to the advantage of the power of compounding interest year after year. As the interest goes towards your principal, your interest continues to increase your principal.


While we understand how the compounding effect works, and if you have any questions be sure to review it, because compounded savings helps you meet your goals. But once you make the decision to save and invest, you’re on the right path. You’ll meet your goals, and you’ll be able to pay for the college of your dreams (or your kid’s dreams).



The Amount to Save

First, you want to consider saving always a percentage of your salary per month. Probably, you think that you don’t have any money left per month, but believe me, you have leftover money to save. Self-awareness of your spending habits is a must! You are fiscally responsible, or strive to be, not solely for you but for your future i.e. your children’s education and future as well.


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How to plan your budget

  1. Analyze the obvious expenses first (the big expenses like mortgage, retirement, etc), 
  2. After the big expenses analyze the small expenses (E.G: the usual coffee, clothes). You probably reviewed the big expenses before, and if you couldn’t cut any of those, you will find a lot of small expenses that you can cut.
  3. Try to save at least 10% of your salary for the investment account and another 10% to general savings for emergencies.


What should I do with the savings?

investing, saving, college savings, education planning, children’s education

As I said before, you should start saving for college as soon as possible. The sooner the better.


Now I’ll review a few options that are good to save money in the long term for college. You can do planning education expenses in these ways:

  • 529 plan.

One of the options is to choose a 529 plan. These savings plans could be a college savings plan or a prepaid tuition plan. These plans are determined by state or private colleges.


A 529 plan is a college savings plan that offers tax and financial aid benefits, so you can save and invest for K-12 tuition in addition to college costs. Using these plans you have tax-free growth and tax-free withdrawals when the funds are used toward qualified higher education expenses. You can’t use this money for other things (like buying cars, houses).


There are different 529 plans, so there are different options. There are plans that you can treat a deposit of up to $75,000 in one year as if it were made over a five-year period. You can see the broad range of 529 plans.


  • Coverdell Education Saving Account.

With Education Savings accounts, known as ESAs you can take advantage of tax-free withdrawals to pay for qualified higher education expenses. 


You can control your investments or choose professionals to do it. This option is great if you think that you can choose better than professionals. Sometimes the managers of these accounts don’t spend much time deciding and don’t analyze the market too much. And mainly, they don’t have “skin in the game.”


This account is counted as a parent asset on the FAFSA (and that is not going to negate a financial aid application either so you can still apply even with a Coverdell account). You should deposit at least $2,000 per year, and the deposits should be before the student turns 18.


There is one caveat: Only married couples earning between $190,000 and $220,00 or individuals earning between $95,000 and $110,000 are able to contribute. This significantly reduces the number of contributors. 


  • Qualified U.S. Saving Bonds

These bonds are federal tax-deferred and state tax-free. The U.S. government backs these bonds that have an interest. Series EE and I bonds can be tax-free for qualifying higher education expenses.


One of the drawbacks of these bonds is that if bond proceeds are not spent on tuition and fees, interest earned will be included in federal income and subject to tax.

  • Roth IRA

Roth IRA deposits can be withdrawn at any time for any reason, and you can choose from a variety of investment options.


There are limits on how much you can contribute. So investing the maximum amount can still be less than what you desire to save; and withdrawals from a Roth IRA to pay for a college is counted as a base-year income on the FAFSA.


The amounts change each year but as of 2020 are currently $6000 a year.

  • Custodial accounts under Uniform Transfer to Minors Act/Uniform Gifts to Minors Act

These accounts are versatile. You can spend the money on anything as long as this money goes to the minor. There are no limits to how much you are investing. 


UTMA and UGMA amounts are deposited for the benefit of minors after the donor has paid tax, so these are after tax dollars. As such they are also free of gift tax to a limit of up to $15,000 or $30,000 if the gift is from a couple. 


Additional note: You can however contribute as much as you want for the benefit of the minor. However, here gift taxes come into play. For more detailed about this, check  What is the meaning of estate planning and why is it important? 


The minor can also have this amount filed on their kiddie tax, as long as their income is below thresholds currently set at $2,100. Thereby they pay lesser, if any, taxes.


One of the main disadvantages of these types of accounts is that fees and taxes are applied. Also, these accounts are counted as a student asset on FAFSA (in other words, this can reduce the aid package significantly).


  • Mutual Funds

Before Boracchia Wiviott Wealth Partners innovated with the best stocks to buy in each portfolio, the easiest way to save were mutual funds. The funds can be spent on anything, and they don’t have limits on investment. But as simple as it is, it has cons. Earnings are subject to annual income taxes, and capital gains are also taxed. This account also counts in the FAFSA. In addition, and this is the biggest drawback, the fund managers of mutual funds are not investing for you specifically. And they are not personal in nature rather large corporations who ultimately have been known to look out for shareholders of their company foremost; and you as an investor in a mutual fund are not a shareholder. Mutual funds also have higher fees than anything else.

  • Investing Profits Pros by Boracchia Wiviott Wealth Partners

The value of working with the award winning Boracchia Wiviott Wealth Partners is that our team does all the  investment research and analysis and provides easy step by step instructions on implementing high level investment and stock market strategies that the best investors, Investment Advisors, Hedge Funds, Family Offices, and financial advisors in Los Angeles and top firms everywhere are incorporating at a fraction of the cost. 


So in conclusion, you can choose from a wide range of investment options. You will have to analyze which one best fits your needs and your time horizon.


Every option has its pros and cons, so there’s not a better option, that I would recommend to everyone. However if you don’t mind placing the trades yourself, then the Investing Profits Pros stock market subscriptions will be most suitable. You’ll save money but still have professional advice based on your individual risk tolerance and goals for your children's education. 


We have lot’s more resources. 

Begin the investment subscriptions today that can help you achieve your most precious goals, with your Boracchia Wiviott Wealth Partners.

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Lea Wiviott Boracchia, Co-Founder, FinancialPlans.Info and InvestingProfits.Pro, both apart of the renowned Boracchia Wiviott Wealth Partners

We are a registered investment advisory focused on accessible wealth planning for everyone. Our mission is to help women, men and people of all ages, races, locations, and anyone plan and secure their most successful future. We were originally established in 2005 by way of 3 firms before my husband Marc and I registered our independent advisory in California.


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