Our children are the most beautiful part of our life. And all parents want to give their children a better and brighter future than what they had themselves received. However, with the education fees soaring up year after year, parents are left with no choice but to invest heavily and smartly into savings.



But at times, these savings are not enough and parents have to resort to obtain an educational loan for their children. This not only burdens the parents but also the future of the child. This article throws light on some effective and viable saving plans for the higher education of your child.

529 College Savings Plan:

This plan allows anybody to save up for education. The most significant benefit of this plan amongst the others is that if you use the reserves for competent educational expenses your earnings become tax-free. Also there is no upper limit on the maximum amount that you can save up using this scheme. In case you do not want to use the income for education, you do not lose your money! You can still withdraw your funds but by paying a penalty fee and the other taxes.

If your child becomes handicap or in event of death, you can still withdraw the money and the penalty is also waived off in this case. Another distinct advantage of this scheme is that only 6% of the money that the parents have is accounted for as the asset of the child thus increasing the eligibility of the child to achieve the aid. Although the 529 plan can be purchased from a mutual fund company or a broker, the investment options are a bit restrained.

UGMA/UTA Custodial Account:

This stands for Uniform Gifts to Minors Act/Uniform Transfers to Minors Act. The advantage of this plan is that there is no limit on how much you can input and it is quite easy to avail this plan in most financial companies. However the benefits end here as the disadvantages certainly overshadow the advantages.

The first major fallout is that this plan offers very limited tax benefits; beyond a certain predetermined limit, the investment is taxed. Another major disadvantage is that this plan requires the account to be registered in the name of the child. So in case your child or you need to use this money for financial aid, the amount is rehashed at a rate as low as 35%.

Coverdell Education Savings Account (CESA):

This plan is analogous to the 529 plan. The dissimilarity lies in the limit on how much money you can contribute, usually it is around 3000$ per child. Also there is a limit on your gross income to qualify for the CESA plan. Again like in the 529 plan, only 6% of the money of the parents is accounted for as the asset of the child thus increasing the eligibility of the child to achieve the aid.

Finally it depends on how well the parents have managed to secure funds for the future of the child education and thus accordingly they must select the best plan to suit their requirements.