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Marion Syversen Marion Syversen
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Saving for education

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You've got a young and growing family and wonder about saving for your precious one's college education. I mean, she can be whatever she wants to be, so long as she's happy, right? If that means a post-secondary education, are you thinking of helping with the costs? How do you save, and what vehicle might be good for your family?

My first concern is you. Being a great role model is good parenting. So when it comes to money, please take care of yourself first. As parents it's easy to sacrifice for your child. But sacrificing everything of your finances for them leaves you lost. Who will come in to rescue you

On another level, the lifestyle of total self-sacrifice is terrible for developing strength in your growing child. It creates a weak and needy person when what you'd hope to do is make life free of worry. But resilient, caring, strong individuals struggle and overcome. Your child will never be strong if you always carry them.

Some parents believe the same holds true for your student and their education. A little of their own 'skin in the game' when it comes to your expectations may help develop tenacity and create a feeling of ownership if their hard work can play some role in their education. 

So, I urge you as a parent and as an advisor, first, take care of your financial future. You are worth the investment. I also ask that you consider how to provide support for your child while keeping them involved and invested in their own education. 

There are at least three tools that can be used for your child's education. These instruments vary in how they are taxed and who has control of the assets. They have pros and cons and to get a better understanding of what might be the best choice for you, speak with your advisor or do your homework.

529 - Tax-deferred savings in which the participant has control and used for almost all post-secondary education from pursuing a medical degree to a trade school. In the state of Maine, the accounts are called NextGen. Available either on your own  in the state of Maine, the paperwork is given to you at the hospital or birthing center - or available, with more investment options, through an advisor. All 529 accounts, as a federal regulation, limit a child's control of the assets. And limiting control, especially with some teenagers, can be a significant benefit.

Joint savings accounts - Held at a brokerage or through your local financial institution, a joint account allows a child to access the money sometimes before you'd like them to have it and for purposes unplanned. Taxes are paid each year on the growth in these accounts. You have lots of flexibility in its management. 

Roth accounts - IRAs can be used for 'qualified higher education expenses.' I am not a tax expert, but these withdrawals are free of penalty in the event they do not exceed the expenses and they are used for the account owner or the account owner's spouse, child, or grandchild - even your spouse's grandchild.

There are many more details about these various options that this small article cannot examine. As I said before, speak to an expert or do your homework before deciding on what strategy works best for you.

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