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The College Savings Talk

With the rising cost of college, parents are having the talk (the college savings talk) now more than ever with their children. According to a survey of parents, half will discuss saving for college with their children ages 7-12 and 80% will discuss college savings plans with their teenage children.

How to Curb the Cost of College

Whether your child is in diapers or in drivers ed, you can curb the rising cost of college. Choose a college savings plan that matches your priorities. There are a range of options, from 529 savings or prepaid tuition plans to custodial accounts, gifting or other tax-advantaged strategies.

  • A 529 plan is one of the most popular tax-advantaged college savings options and includes both college savings plans and prepaid tuition plans. With either plan, your contributions grow tax deferred and earnings are tax free at the federal level if the money is used for qualified college expenses.
  • A Coverdell education savings account is a tax-advantaged education savings vehicle that lets you contribute up to $2,000 per year. Your contributions grow tax deferred and earnings are tax free at the federal level if the money is used for the beneficiary's qualified college expenses. You have complete control over the investments you hold in the account, but there are income restrictions on who can participate.
  • With U.S. savings bonds (Series EE & Series I), the interest earned is exempt from federal income tax if the bond proceeds are used for qualified college expenses. These bonds earn a guaranteed, modest rate of return, and they are easily purchased at most financial institutions or online at www.treasurydirect.gov. However, to qualify for tax-free interest, you must meet income limits and other criteria.
  • An UTMA/UGMA custodial account is a way for your child to hold assets in his or her own name with you (or another individual) acting as custodian. Assets in the account can then be used to pay for college. All contributions to the account are irrevocable, and your child will gain control of the account when he or she turns 18 or 21 (depending on state rules). Earnings and capital gains generated by assets in the account are taxed to the child each year.

A financial advisor will help you understand your options and what will work best with your time frame. Remember, the sooner you begin saving, the better. Even modest savings can add up over time.

College is closer than you think. Curb rising tuition prices with Busey. For a savings strategy for your family, stop by one of our many convenient locations today or call 1.800.67Busey.

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Investing involves risk and you may incur a profit or loss regardless of strategy selected. Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision. You should discuss any tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC, and are not insured by any financial institution insurance, the FDIC/NCUA or any other government agency, are not deposits or obligations of the financial institution, are not guaranteed by the financial institution, and are subject to risks, including the possible loss of principal. Raymond James is not affiliated with the financial institution or the investment center. Busey Investment Services is independent of Raymond James Financial Services, Inc.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Busey Investment Services and not necessarily those of Raymond James. The information has been obtained from sources conserved to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.

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