Collin County Living Well Magazine May/June 2016 | Page 33
• Monies can be withdrawn tax-free
if used for qualified education expenses.
Trust account: If you’d like to put
money aside to benefit multiple beneficiaries, and be able to place re-
As you look at different savings
options, there are a few things
to keep in mind:
• Are there yearly limits on contributions?
• Does the income level of the donor affect eligibility?
• Is the growth on the
monies taxable?
• When can you withdraw monies without penalty?
• What can I spend the
money on without penalty?
• At what age does the
minor have access to the
monies?
Time Value of Money
Compounding
The biggest benefit of
starting to save early for
your children and grandchildren is that it allows
you to maximize the time
value of money and compounding. Here’s an example of how significant
the impact can be:
For a newborn, you start
an account and begin
depositing $100 per
month. Using a 5% annual interest rate, compounded monthly, at
age 18 the balance is
$34,920. That could
definitely help with college education costs.
Sam and Pops
strictions on the use of the monies,
another option to consider is creating
a trust. This requires an attorney to
draft the document and customize it
for your goals.
Kids can also