What You Need to Know: Financial Planning for Education

This National Financial Awareness Day, let's review financial planning for education including the many savings plans there are and how to get started.

Today is National Financial Awareness Day, and while this is likely not a holiday many have added to their personal calendars, it is a good one as it reminds us to think about our finances and goals. Along those lines, one avenue of finances that is important to consider is that of financial planning for education. Many people have a goal in mind to help a loved one, a child or grandchild for example, afford the cost of education. Whether it is assisting with the cost of a private school anytime from kindergarten up to high school graduation or whether it is looking further ahead to college, starting a savings plan can help to meet those financial goals.

If you are wondering how to start the education savings process, an experienced financial advisor can help by projecting educational costs for public and/or private institutions, then recommend savings plans and investment vehicles that would be best to meet those goals. Since there are many educational and college savings plans available, we outlined a handful of them below to help you get started:

  • PA 529 Investment Account – In this type of account, the money invested grows tax-free if the funds are used toward eligible education expenses and can be used to pay for expenses such as room and board, software, and computers. A PA 529 plan is used to cover the cost of higher education and features multiple age-based and static investment options. Learn more about how this type of plan works by visiting the PA 529 website.
  • Coverdell Education Savings Accounts (CESA)  Under this account, parents and guardians can make nondeductible contributions to an education individual retirement account (IRA) for a child under the age of 18.  These accounts can be used for qualified elementary and secondary school expenses and college costs.  Much like a 529 account, Coverdell funds can be tax-free if used toward eligible education expenses. One important differentiator with this type of account is that there is a cut-off amount for contributions which is $2,000 a year.

RELATED: Read about these 8 tips to build a strong financial plan.

  • Uniform Transfers to Minors Act (UTMA) – The UTMA allows a minor to receive gifts without the aid of a guardian. These gifts can include money in addition to other items such as real estate, royalties, fine art, etc. With this type of account, a custodian – often another family member –holds the funds for the minor until the minor reaches a designated age. This account also protects the minor from tax consequences on the gifts, up to a specified value.
  • Financial Aid – Lastly, but certainly not least, is the topic of financial aid. According to the 2020 Sallie Mae/Ipsos survey How America Pays for College, scholarships and grants covered 25% of college costs in 2019-2020. Scholarships and grants are two types of college financial aid that do not need to be repaid. Many states and colleges set priority deadlines by which you must submit the FAFSA form to be considered for the aid programs they administer. There is also a federal deadline each academic year. To learn more or find the deadlines applicable to you, visit studentaid.gov.

Planning for education expenses can be overlooked since there are so many other financial goals to keep in mind; however, it is one that is important to plan for so you can stay on track financially when the need arises.

If you have questions about this information or your financial plan, call us today at 412-630-6000. Our experienced financial advisors are here to help.

(412) 630-6000

(800) 245-5939

(412) 630-6001 fax

Quick Links

At Bill Few Associates, we offer a wide range of financial planning services tailored just for you.

For a no-obligation consultation

Contact Us