College Planning

Develop an Education Funding Plan for Your Child

The younger your child is, the more difficult it can be to fully understand the need to develop an education funding plan. But with education expenses often starting as early as elementary school, it’s clear that the sooner you start saving, the better. Even if you feel like you’ve already fallen behind, it’s not too late — what you do today can have a great impact on your child’s education.

Get a Head Start on Education Funding to Tackle Rising College Costs

According to the College Board, the average cost for tuition, fees, and room and board for a public university in 2014-2015 is $18,940; the same expenses for a private university are $42,420.*

Too often, these rising college costs stand between your children and their dreams for the future. Even if they excel in school, your children still might not be able to attend the college of their choice. The lack of an education funding plan often forces parents and students to make a difficult choice — take on the burden of student loan debt or avoid college altogether.

Choose an Education Funding Plan That’s Right for You

The chart below compares some of the most widely used education funding alternatives. Your Financial Advisor can help you decide which ones work for your unique situation.

Compare Your Education Funding Alternatives


Education Funding Product Features 529 College Savings Plans1 Coverdell Education Savings Account2 Custodial Accounts (UGMA/UTMA)3 Parent-Owned Taxable Brokerage Accounts
Income limitations for participation None Single filers: $95,000- $110,000; joint filers: $190,000-$220,000 None None
Control of the account Account owner Custodian controls until beneficiary turns 30 Custodian controls until age of termination Account owner
Annual contribution limits $14,000 per beneficiary ($28,000 for a married couple)4 $2,000 per designated beneficiary younger than 18 $14,000 ($28,000 for couple) without being subject to federal gift tax treatment None
Current taxation of earnings None If child is younger than 19, or a full-time student under age 24, the “kiddie tax” applies Taxed at the owner’s rate
Qualified distributions are federal-tax-free Yes Yes N/A N/A
May have state tax benefits Yes Yes No No
Taxation/penalty for withdrawals for nonqualified expenses Earnings portion of nonqualified withdrawals is taxed as ordinary income to the plan participant and may be subject to a federally mandated 10% penalty (earnings only). Penalty-free withdrawals are permitted in the event of scholarship or death or disability of the beneficiary. N/A N/A
Investment alternatives A choice of portfolios managed by professional fund managers Owner (custodian) chooses investments
Can be used for college expenses Yes Yes Yes Yes
Can be used for primary and secondary school expenses No Yes Yes Yes
Can change beneficiaries Yes Yes No N/A
Please consider the investment objectives, risk, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your Financial Advisor. Read it carefully before you invest.
*Source: “Trends in College Pricing 2014-2015.” Copyright 2015 by, Inc. Reprinted with permission. All rights reserved.
1College savings plans offered by each state differ significantly in features and benefits. The optimal plan for you depends on your specific objectives and circumstances. In comparing plans, please consider each plan’s investment options, fees and state tax implications. As with all tax-related decisions, consult with your tax advisor.
2Qualified Coverdell Education Savings Account distributions are not subject to state and local taxation in most states.
3Earnings on custodial accounts may be subject to the “kiddie tax” if the child is younger than 19 years old. If the child continues to be a full-time student, the rules apply until he or she turns age 24. Generally, earnings on the account are taxable at the parent’s highest marginal rate.
4$70,000 per beneficiary in the first year of a five-year period to avoid gift tax consequences ($140,000 per married couple).
Rhodes Securities does not provide tax or legal advice. Be sure to consult with your own tax and legal advisors before taking any action for education funding that may have tax consequences.