In a recent study, it was found that most college degrees have a positive return on investment, but many parents are left wondering about the future of their children who may not go to college or pursue alternative education paths. To help parents save for their children’s future, financial advisors suggest a variety of options for investing in their child’s future, regardless of their educational path. These options include opening a Roth IRA in the child’s name, investing in a brokerage account, and utilizing high-yield savings accounts or certificates of deposit.
A Roth IRA in a child’s name is a great way to save for their future, as contributions can be withdrawn penalty-free and earnings can be used for educational expenses. On the other hand, a brokerage account allows parents to maintain control over the funds and can be more beneficial for children who may not have the maturity to handle a large sum of money. High-yield savings accounts and CDs provide guaranteed returns for short-term savings, although they may not keep up with long-term inflation rates.
For parents who are unsure if their child will attend college, a 529 college savings plan may still be a viable option. These plans offer tax benefits and can be used for a wide range of higher education expenses, including vocational and trade school programs. Additionally, recent tax code changes allow families to roll over 529 plan funds into a Roth IRA for the beneficiary, although specific requirements and limits apply.
Ultimately, the decision to invest for a child’s future should depend on the family’s financial situation and priorities. While saving for a child’s education is a common goal for many parents, it is important to prioritize financial needs such as retirement savings and emergency funds. Financial advisors recommend evaluating individual circumstances and determining the best course of action based on personal financial goals and obligations.
