Benchmark FCU Shares Three Ways to Give the Gift of College This Holiday Season

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By Rebecca K. Worthington

If you’re like my family and me, it can be hard to come up with new gift ideas for nieces, nephews, and grandchildren each holiday season. Do they really need yet another toy? Or maybe they’re at that tweens/teens age where their tastes change from week to week.

Before you buy, consider this: Over the last 30 years, education costs have increased by more than 500 percent, according to Forbes magazine. Since it takes a village to send a child off to college these days, I find myself increasingly recommending the gift of college savings this holiday season. Here are three options:

The 529 Plan

The most popular college savings gift is the 529 plan. Your contributions to a 529 may be state tax deductible depending on the plan you choose, and earnings are tax-free when used to pay for qualified college expenses.

I particularly like the 529 plan because it offers you (the account holder) the most control over the account, so you can feel confident your gift is being used for college, and not for your grandson’s spring break. And if you plan on gifting a substantial amount, the 529 offers many options for contributions, a feature not available with other college savings strategies. An investment service representative at your financial institution can help you choose which plan is best for you.

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Coverdell ESA

While you’re contributing to a 529 plan, you may also be able to contribute to a Coverdell Education Savings Account (ESA). The Coverdell ESA is a nice option because it can also be spent on grade school expenses. It’s also ideal if you want more investment options, or if you want to give a smaller gift and avoid gift tax rules altogether. The annual maximum contribution per year is $2,000. There are age restrictions on Coverdell ESAs for the beneficiary, and you may not be able to contribute if your gross income is too high.

Just like the 529, your contributions may be state tax deductible and earnings are tax-free when used to pay for qualified college expenses.

Share Certificates

If you’re worried about market instability affecting your college savings, Share Certificates may be the safest option. Share certificates often earn higher dividends than regular savings, checking, or money market accounts. However, a Share Certificate usually requires a single deposit that is held for a set period of time. Generally, the longer the term, the more interest you can earn.

Some financial institutions offer more flexibility with your Share Certificates, so be sure to do your homework. For instance, at Benchmark Federal Credit Union, we can hold your money for as little as three months if you wish, and we also have a “step up” feature that allows you to step up your rate one time during the term.

How to Decide?

People tell me all the time that they’d like to begin the gift of college savings, but they just don’t know how to get started. My advice is always the same: Have a conversation with your financial institution. Most institutions like mine, Benchmark Federal Credit Union, have investment representatives who can help you assess your income and savings goals, to determine the right gift options for you and your family. If it feels like there’s nobody on hand to help you start that process, don’t give up on this great gift. Turn to a financial institution that is responsive to you, and begin the gift of college savings. Happy Holidays, from all of us at Benchmark Federal Credit Union.

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Rebecca Worthington is Vice President of Marketing with Benchmark Federal Credit Union, which has new branches in Phoenixville and downtown West Chester. Celebrating more than 75 years of service, Benchmark FCU is the only federal credit union that exclusively serves Chester County. Its mission-first focus is supported by a combination of getting to know members’ unique needs and customizing banking accordingly, as well as delivering the state-of-the-art offerings that optimize their banking experience. 610-429-1600; BenchmarkFCU.org.

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