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If college is the right next step in a child’s life, we know as parents that it’s important to plan as early as possible how we’re going to pay for it. In giving clients advice about financial planning associated with higher education, I generally keep to a few simple guidelines.

Sure, you could write checks for four years, but there are other options. Passing on the responsibility to strive for a scholarship is an alternative, as is applying for loans. Student loans are a great first impression in the world of finance and can shape habits and responsibility. Then, when loan payments come due, you might leverage those savings you’ve accumulated and pitch in to help with that debt. 

My opinion is that, if you are able to save a bit for your child’s future, it is better to give them this gift when they are in their later twenties. Waiting will give them time to possibly seek grants, scholarships, and other funding, especially if they believe it’s going to be their own dime.

Regardless of your approach — student loans, scholarships (fingers crossed), or out-of-pocket payments — having assets set aside is important. Here are a few possible places to start a college savings account:

  • Uniform Transfers to Minors Act (UTMA) savings account is a joint securities account held with you and your child. You can tailor the investments to be as conservative or aggressive as you want based on the time horizon you have. Beware that these accounts typically convert to the child’s name at age 18.
  • A separate brokerage account in your own name is helpful if you’re starting to save when your child is a teen. You can pay long-term capital gains and take withdrawals from the accounts when tuition bills come due. Keep in mind that there is less time to save between now and when you will need to use the funds, and save accordingly. 
  • 529 plans are often a good fit for those who started early enough or have multiple children.

If you are new to this equation, and are great resources can help with long-term planning. Also, take into consideration that the average student goes to undergraduate for 4.9 years, so don’t automatically assume you’ll be done in four years.

If settlement money is in yours or your child’s future, or you’re a trial attorney, we have specific strategies we can recommend to help plan for settlement. Feel free to give us a call.


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