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34 SEPTEMBER 2016 OUTDOOR POWER EQUIPMENT www.outdoorpowerequipment.com Comparing savings vehicles Finding tax-effi cient ways to save for your child's primary, secondary and college education costs may help your dollar go that much further. There are several education savings vehicles to consider, and depending on your fi nancial needs and circumstances, one may make more sense than the others. 529 plans These plans are great for saving for college and other types of post-secondary education. The earnings in these plans grow tax free, and you can then make tax-free withdrawals to pay for qualifi ed college expenses. The account owner controls the funds (not the benefi ciary), and the contributions limits are high — typically between $200,000 to $500,000, depending on the plan you choose. But consider: You cannot use 529 funds for K-12 expenses, and you'll pay a 10-percent penalty plus taxes on any money withdrawn for purposes other than qualifi ed college expenses. The penalty is only on the earnings portion of the withdrawal. The 10-percent penalty is waived with death, disability, and scholarship (of the benefi ciary). UTMA/UGMA These custodial accounts created under UTMA and UGMA can be used to save for K-12 and college expenses. You can gift money to an account, which is owned by your child. The account's earnings are taxed at the child's rate, which is typically lower than your own. There are no limits to the amount you, family members and friends can contribute to the account. You can also withdraw the funds at any time, as long as they're being used for the benefi t of your child. But consider: Once your child reaches the age of majority — usually 18 to 21, though it varies by state — the money in the account belongs to him or her. As a parent, you have no legal control over how the money is spent. This is an important consideration if you're concerned about your child's ability to preserve the funds for educational use. Coverdell educational savings accounts These plans cover K-12 and college expenses. Like 529 plans, earnings and distributions are tax free as long as the money is used for qualifi ed educational purposes. But consider: These accounts are only available to individuals earning a modifi ed gross adjusted income of $110,000 ($220,000 for joint fi lers) or less per year. The max contribution is $2,000 annually, and the funds must be spent on education before the account benefi ciary turns 30 — otherwise, you face taxes and penalties. IMAGE @ISTOCKPHOTO.COM/GOIR Funding your child's future: Education savings options ■ BY WEALTH MANAGEMENT SYSTEMS, INC. For today's parents, planning for a child's college years often begins long before said student starts fi lling out college applications. Rising college costs require most families to save for their children's post-secondary education, and the earlier you begin, the better. Depending on a variety of factors, including the quality of your local schools and your child's interest and aspirations for higher education, your child's college prep may also include attending private elementary and secondary schools. Fortunately, there are many tax- advantaged ways to save for your children's schooling and ensure that your dedicated education funds go a long way. Contemplating costs College costs have been on a steady rise for more than a decade. According to the College Board, annual tuition and room and board at an in-state, public, four- year school averaged $19,548 for the 2015-2016 school year. For a private, four-year school, the average cost was $43,921. 1 Setting aside funds for your child's college education can become challenging when you're simultaneously paying for private, K-12 education. Tuition for private, K-12 school averages $13,640 per year, according to the most recent statistics from the Council for Private American Education. 2 But, the price tags can vary widely, depending on which city you choose to call home. In New York City for example, a handful of elite, private high schools charge more for one year of tuition than some Ivy League schools. If private elementary and secondary schools are part of your student's path, be sure to create an accurate budget that refl ects the unanticipated costs and savings. For example, you may need to pay for tutors to help your child prepare for private high school application exams or keep up with courses. However, school uniforms may actually save your family money spent on trendy, teen wardrobes. FEATURE STORY | Wealth Management These custodial accounts created your child. The account's earnings for higher education, your child's college prep may also include attending private advantaged ways to save for your children's schooling and ensure that College costs have been on a steady rise for more than a decade. According to the College Board,