The Difference Between 529 College Savings Plans and UGMA/UTMA Custodial Accounts

The Difference Between 529 College Savings Plans and UGMA/UTMA Custodial Accounts

As parents we want to give our kids the best possible head start financially. For many of us that means turning to investment vehicles designed specifically with minors in mind; two of the most popular are the 529 Education Savings plan, most commonly referred to simply as the 529 plan, and the saving account provided by the Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA). Both of these options offer ways for parents to begin saving for their children and for the accounts to eventually transfer ownership to the designee. In today’s post we explore the pros, cons, and specific functions of these two popular accounts to help you choose the right one for your child.

Paying for Higher Education [Infographic]

The importance of higher education has only risen in the past decades, with more and more jobs requiring a college degree to even be considered. According to the U.S. Census Bureau, those with a bachelor’s degree will earn nearly twice as much over the course of their lifetimes as those who have only a high school diploma. This means that rather than facing the choice of whether children should attend college, more and more parents are instead faced with the decision of how they will pay for it. [Infographic]

Investing in a 529 Plan

A 529 plan (also known as a qualified tuition plan) is a tax-advantaged way to contribute to your child’s college savings. While each state offers its own 529 plan, not all plans are created equal. The investment options and flexibility available within each plan will differ somewhat, so it’s important to do some research before choosing what plan to contribute to. Remember, you aren’t restricted to your state of residence’s plan, so shopping around can be beneficial. Learn about your options before investing in a 529 plan so that you can choose the plan that best fits your college savings needs.