Opening an Education Investment Account

Video Transcript

"Hi, there. I'm Cathy Pareto, the founder of Cathy Pareto and Associates, certified financial planner, here in Miami, Florida. In this clip, we're going to be talking about how to open up an education investment account. Now, there are a number of ways that you can open up an education account for a child or yourself if you want to go back to school. One of them is a college savings plan, otherwise known as a 529 account. And with a 529, you can put away up to 300,000 dollars of monies towards the child's education, and it grows tax free. You can buy a number of different funds sponsored by different states and different fund providers, and it's a really effective way to compound or grow that portfolio with different types of mutual funds tax-free, as long as it's used for education. There's also college prepaid plans, which, again, are typically done directly with the states and state university programs where you lock in the cost of education at today's prices for that child, depending on when you began the program. And so you know exactly that your child's education will be covered, unlike with a 529 plan, where it's subject to market risk and fluctuations. And finally, you can open up a Coverdale IRA or education IRA, as it used to be called. The unfortunate thing about that is that you can only put away 2,000 dollars a year towards that, but it's another effective way where you, as a parent or a grandparents, can put money towards your child or grandchild's education. And so that's just a couple highlights on how to save for your child's education, and this has been Cathy Pareto in Miami, Florida."