Saving for Your Child's Education

Guest Column By:
Angela C. Titus McEwan
Archer & Greiner PC

Aside from the purchase of a home, the investment that you make in your child’s education will be the largest investment that you make during your lifetime.  This is even truer if you have more than one child who pursues higher education, and this does not include payments for preschool or other private schooling prior to a child’s seeking a college degree.  And, with seemingly no end in sight for these costs that increase each year at a rate higher than general inflation, how to save and how much to save are constant questions on the minds of every parent.  Moreover, families teetering on the edge of qualifying for financial aid worry about how any savings may impact that qualification. 

Whether your child is a newborn or a teenager, the first step is to make a plan.  Although your child may be the next Derek Jeter or Albert Einstein, a plan relying on a child’s possible athletic or academic achievements would be equivalent to the belief that you would win the historical Power Ball of 2016.  Rather, an appropriate plan involves consideration of all available sources, including financial aid, scholarships, and a family’s ability to meet its expected contribution through private loans or otherwise.  A plethora of informational resources, tools and calculators is available on the Internet to offer a basic understanding of the process and some insight as to where to start.  Consulting with a financial advisor and Estate Planning attorney to construct and implement a plan that is best suited for your family would tighten up the planning process. 

After you develop your plan, saving early and often and in an appropriate amount could be the key to a healthy college fund.  Knowing what investments are best suited for your family is imperative toward meeting that goal.  For example, 529 Savings Accounts provide tax-free growth and tax-free distributions, provided they are made for “qualified higher education expenses at an eligible educational institution.”  The account owner retains control over the designation of the beneficiary, and despite this control, the account remains excluded from the owner’s estate for estate tax purposes.  Moreover, if owned by a grandparent instead, the account may not even factor into the consideration of financial aid for the student.  In contrast, funds invested in a “UTMA” account are deemed owned by the beneficiary, which is typically the least favorable treatment of an asset for financial aid consideration.  Although the UTMA account is available for expenditures other than education, its use may have tax implications to a parent with a legal obligation to support the beneficiary, and when the child attains the age of majority (typically at age 21), the beneficiary has a right to the remaining funds in the account.  And guess what – they are not required to use the funds for their education, so expect to see that red Jaguar in your driveway soon.  A plan that considers multiple saving sources could provide a bigger bang for your educational buck.

Blended families and parents contemplating divorce face additional challenges to the educational puzzle.  The income and assets of the noncustodial parent are those included on the FAFSA, but the owner of a 529 Savings Account can change its beneficiary.  And, depending upon the college or university selected by the child, the noncustodial parent’s income and assets may become relevant to the financial aid determination anyway.  The agreement between divorcing couples as to how a child is “claimed” for tax reporting purposes could further impact available aid, and if one parent remarries, the step-parent’s finances may become relevant as well.  Obviously, decisions involving a child’s education are not issues to be taken lightly.

If you would like to learn more about how to save for your child’s education, join us for a complimentary lunch seminar on February 18th in Cherry Hill, NJ. For more information and to register visit:

Are you an attorney, CPA, or financial advisor who would like to learn more about this topic and earn professional educational credits at the same time? Join us for a complimentary afternoon educational seminar on March 3
rd in Haddonfield, NJ. For more information and to register, visit:

In the meantime, if you have questions please contact Angela C. Titus McEwan in Haddonfield, N.J., at (856) 795-2121 or

DISCLAIMER: This client advisory is for general information purposes only. It does not constitute legal or tax advice, and may not be used and relied upon as a substitute for legal or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified attorney or tax practitioner licensed to practice in the jurisdiction where that advice is sought.