Investment Management for Private Investors

UTMA and UGMA accounts

These custodial accounts act as a trust for your child. In other words, if you have assets like stocks, bonds, annuities or plain old cash that you’d like to reserve especially for your kids, you can put them in one of these custodial accounts. (UTMA stands for the Uniform Transfer to Minors Act; UGMA, the Uniform Gift to Minors Act.) The downside is that when it comes to financial aid, your college will consider this when deciding how much to give your child. So if you have a lot of money in one of these accounts, the school may not give you much. On the other hand, if you have a lot of money in one of these accounts, you may not need financial aid all that much. Still, before opening a UTMA or UGMA, it’s best to discuss it with a financial advisor.

Coverdell Education Savings Account

This is another type of trust or custodial account that’s specifically for a child’s college education. The main downside is that you can’t put more than $2,000 a year into one or multiple ESAs. So if you open a Coverdell ESA for your child and your father does, too, you could put $1,000 in and he could contribute the same, but then you’re done. Of course, if you’re fighting to sock away $200 a year, this may not bother you. Still, limitations like this are why 529s have become so popular. But 529s do have maximum lifetime contributions ranging from approximately $200,000 to $400,000, depending on the state.

Get your child to pitch in

If you have a four-year-old, you’re out of luck, but if your 14-year-old is baby-sitting, and certainly if your 17-year-old is flipping burgers, he or she could start putting some money away for college. That’s a suggestion from George Walter, vice president for enrollment services at La Salle University in Philadelphia. Walter acknowledges that it isn’t always feasible, but he suggests students break up their paychecks into three portions.

“Weekly expenses, short-term goals and long-term expenses, including college,” he says. “This approach will help in both budgeting and establishing a good practice that will help the student prioritize and prepare them to manage income and expenses throughout their lives. Even in the summer between graduation and first semester in college, this practice can result in a student saving enough to pay for their books and supplies for the first year.”

If you can’t raise enough money, lower the costs

In other words, if your spending capacity is limited, try to reduce the amount of money your child will need for college.

This is obviously where scholarships can come in, but there are other strategies you can enlist, too. Shakeela Hunter, director of the Student Money Management Center at the University of Texas at Arlington, rattles off a couple of suggestions: “See if your student’s high school offers dual credit and/or [advanced placement] courses, which count as college credit hours. Choose a community college that offers tuition at a lower cost that your child can attend, and then transfer those credits to the university of their choice.”

It will also help if your child knows what he or she wants to study. “On average, it’s been taking students almost six years to graduate,” says Jack Schacht, president of My College Planning Team, a company based in Wheaton, Illinois, that helps parents navigate the challenges of helping kids apply to and fund college.


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