Whether your child is two or twelve, the time is always right to start saving for college! While college may seem years away, believe us when we say it’ll be here before you know it. And with the costs of college tuition rising, you’ll be thankful for your child’s college savings account when it’s time to pay tuition.
At Town & Country Credit Union, we offer a Coverdell Educational Savings Account (ESA) to help with saving for college. Here’s what you should know:
Coverdell Education Savings Account
- Similar to an IRA (Individual Retirement Account).
- Designed for children under the age of 18 for higher-education expenses.
- Minimum deposit of $500 required to open.
- Interest is calculated daily and paid out monthly. To view current interest rates, click here.
Qualified Expenses & Withdrawals
Earnings on the Coverdell ESA are tax free if used for both private or public college education expenses and primary and secondary school expenses. Qualified expenses include tuition and fees, books, supplies and equipment required along with room and board. Any withdrawals for non-qualified education expenses may be subject to penalty.
The contribution limit for an ESA is $2,000 per year, per beneficiary meaning if your child has two accounts, the combined contributions on both accounts cannot exceed $2,000 per year. The funds from the account must be used by the time the child reached age 30 and no contributions can be made after their 18th birthday.
There are income restrictions to consider for both individuals and married couples contributing jointly. When your income reaches a certain point, your contribution limit per year will drop from $2,000 until it phases out entirely. To qualify to make investments in an ESA, an individual taxpayer’s gross income cannot exceed $110,000 and the income limit for married couples contributing jointly is $220,000.
Other Savings Options
In addition to the Coverdell ESA, here are two common savings tools to consider for your child’s education:
CDs: A Certificate of Deposit allows you to earn a higher dividend rate than a regular savings account or money market account while choosing a term length that works for you. At Town & Country, we have a wide variety of terms to select from, all with above market rates. To learn more, click here.
529 Savings Account: The Bank of North Dakota offers another tax-advantage savings vehicle to help put money away for your child’s education. To learn more about the program, click here.
Since there are plenty of savings options out there, we recommend talking to a Town & Country representative to determine which savings plan is best for your child. There is much to consider, including tax implications, income guidelines, maximum annual contributions and more, before opening an education savings account for your child. To schedule an appointment, call 1-800-872-6358 or start your application online by clicking the button below, and we'll reach out to you.
To learn more about the other products and services we offer for kids and young adults, view our recommended financial timeline, click here.