What are custodial accounts and the 529 Plan?

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You all know how expensively college can be and statically speaking the cost of college has doubled every 9 years since 1980. So, for all parents and grandparents, it’s super important to get started early. In this article, we are going to break down several tax advantages ways that you can save for whether it’s your child, grandbabies, niece, or nephew. These methods can be an option for you.

The custodial account and 529 plan are the two popular and effective methods by which you can do prior saving to reach the goal for the education of your child.

What is a Custodial account?

A custodial account is an easy and effective method of saving for your child’s education. In this, you can invest the saving in the Stock and ETFs to grow the money and to reach the financial goals you have set for your child higher education


Benefits of Custodial Accounts

There are many benefits provided by the Custodial accounts-

  • These accounts are flexible having no limits of contributions and income or withdrawal penalties.
  • It does not need distribution at any point.
  • You are allowed to use the saving on living and paying of the beneficiary or investments in stocks and ETFs.
  • Custodial accounts are simple and less expensive than any other trust fund.
  • You are allowed to gift the money and they can do whatever they want with it, even if they are a child.
  • Money in the custodial accounts grows with time without any restriction of using it for any purpose.

What is a 529b college savings account?

529 saving plans are tax-advantaged accounts meaning that any growth dividends and interest you have on your principal, You do not pay any taxes on annually as a matter of fact other than qualified educational expenses you do not pay any taxes. Let say you save a certain amount to save for your child’s college in 529 plan and at the time when your child gets into college the fee cost grows by 8%. Then you don’t need to pay many of those taxes.

In 529 Plan Investments are preset which means you can’t use those savings for purposes other than education. Otherwise, you have to pay penalties and taxes for it. You are not allowed to invest those savings in ETFs and Stock. You can only select how aggressive and conservative u want to be for an account. You can select the time frame option and the level of risk.


Benefits of 529 Plan

  • It has the tax advantage benefits, once you start contributing to these accounts your money can grow tax-deferred.
  • It restricts you to set your funds only for the educational purpose of the childlike college fees, textbooks, and other educational expenses.
  • These accounts have a limited contribution of $300,000 and $500,000 depending on the place you live.
  • You get a tax deduction in the fees of your child’s educations. Each state has different measures and policies of the 529 plan but they are all meant to save a fund particularly for your child’s secure education.


As Educational costs keep on rising, it’s critical to make strides today with saving funds intend to assist your kid with getting an education. Prior arrangements for the education of your child will never go in vain. It will help your child to study stress-free and without the burden of educational loan debt. If you are a parent and are worried about the cost of future education of your child then you have certainly got the plans to execute. Even if you are a year late to start then don’t worry because it’s never too late.


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