It seems that we have been trained to borrow money rather than save and invest. Even those of us who are savers and investors barely think twice about getting a car loan, student loan, mortgage loan, home equity loan, etc. or putting charges on a credit card. As a result, we may (falsely) believe that debt is inevitable and forever.
If I had young children and wanted to set aside money for their education today, I would choose a 529 Plan over a Coverdell ESA or UTMA/UGMA account. I’d also be smarter about the way I funded the account, either arranging gifts directly to an account (for grandparents, aunts, and uncles who ask what my kids want for birthday and Christmas celebrations) or placing cash gifts my kids received into an account. Here are tips on how to channel gifts to college savings.
When I started saving for my children’s education, 529 Plans weren’t yet introduced. So I saved within a UTMA/UGMA and then a Coverdell Education Savings Account. Each type of account seemed to have advantages and drawbacks. I wanted to save more for college in a designated account. But I had heard (more than once) that parents can’t borrow money for their retirement in the way that children can borrow for their education.
Eventually I came to realize that just because my retirement is a financial priority doesn’t mean I couldn’t set aside some money for my kids’ education. Even if though I didn’t save for the entire college experience — tuition, fees, room, board, books, study abroad, etc. — what I tucked away was extremely useful.