As you journey with children from ABCs to adulthood, investing for their future can help to build a strong foundation for the years ahead.
The earlier you begin, the more time the funds can benefit from the power of compounding, where money earned from investments can generate additional returns over time
There’s a range of investment options to consider when beginning this financial journey. Importantly, these accounts aren’t limited to parents–depending on the type of account, other family members or legal guardians can open or contribute to them as well. Education-Focused Accounts Several types of college savings accounts are available to help families fund educational expenses. – 529 Plans – Qualified tuition plans, or 529 plans, are state-sponsored investment plans that provide a tax-advantaged way to contribute to a child’s future education costs–including college tuition and qualified education expenses for higher education and private K–12 education.
Any adult can open a 529 account for a designated beneficiary, and anyone can contribute, subject to contribution limits. There are two basic types of 529 plans: prepaid tuition plans and savings plans. Both allow earnings to grow tax-deferred, and withdrawals are tax-free when used for qualified education expenses, with some limitations.