College Funding –
Where do we begin?
The mere thought of funding a college education can be completely overwhelming for some families. College costs continue to escalate and a college education is a necessity for many career paths. Then there’s the challenge and competitive nature of application and acceptance. Finally, figuring out how to pay for college has been the cause of many sleepless nights. Parents and kids very often feel a lot of stress around this process. Parents especially because figuring out how to pay for college and limiting long-term debt is one more thing they feel they should be doing for their kids.
There are merit scholarships available but finding one that covers all the costs is rare. In fact, most financial aid will be determined by family financial need. Saving for college can be a big part of a family’s financial plan—even if that first day is years off. Fortunately, there are smart ways to do this.
Let’s start with the easy CT 529 College Savings Plan—CHET. CHET is a great way to start investing in your child’s college fund with no minimum deposit. You can fund it monthly, quarterly or whenever you have some extra cash. Sick of your relatives giving short-lived toys for holidays and birthdays? Just have them write that check out to CHET instead!
Let’s talk about the benefits of the CHET account, beginning with my favorite, Tax-Deduction! Connecticut families can deduct up to $10,000 from their state taxable income per account per year. This only gets better, funds taken out of the CHET for college-funding purposes are completely TAX-FREE (my favorite words).
The great Nutmeg State allows you to put up to $300,000 into your child’s CHET plan. Let’s say you have a child prodigy and “they” get that elusive full ride scholarship, not to worry, you can transfer a 529 CHET plan to a sibling and/or parent to fund their higher education costs. On the contrary, your child may grow up to be a business entrepreneur and you would like to take the funds in the CHET plan to support their endeavor, not to worry, you can do that too, but you WILL pay taxes on the gains in the account.
CHET offers several investment options including ones that automatically rebalance your assets to become less risky as your child gets older. You do not need any investment knowledge to enroll in this plan because the CHET comes with its own investment options and is a ‘set-it and forget-it’ college education fund.
It’s free to open a CHET account, but there are always costs to investing. Each account carries a total annual asset-based fee that is made up of mutual fund, program management and administration fees. The annual fee is anywhere from 0.11 percent to 0.99 percent and is deducted from your account balance. You should speak to a financial advisor, like me, to determine your best option and see how investment fees may affect your CHET plan over the long haul.
For more information on the Connecticut Higher Education Trust, search “CT Chet” online to be taken directly to the CT portal with all the information on the program.
— Michelle Cutrali contributed to this article.