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• Monies can be withdrawn tax-free if used for qualified education expenses.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