Get Serious About Saving for College


February 10, 2021



financial education

With college fees increasing every year, it has become impossible for the average parent to pay their child’s tuition entirely on their own. Making smart saving decisions will at least help you cover a larger part of the fees while keeping your child’s student debt to the minimum. And it definitely pays to start thinking of your college finance planning earlier rather than later. The earlier you start, the more you will save, and the lower the debt.

Here are some tips to help parents start saving money for their child’s higher educational needs.

Open an Education Savings Account (ESA) or Education IRA An ESA allows you to save $2,000 (after tax) per year, per child. Plus, it grows tax-free! If you start when your child is born and save $2,000 a year for 18 years, you would only invest $36,000. While the rate of growth will vary based on the investments in the account, you’ll likely earn a much higher rate of return with an ESA than you would in a regular savings account—and you won’t have to pay taxes when you withdraw the money to pay for education expenses.

Enroll in 529 Plans Many states have 529 savings plans to help families begin saving for college as early as possible. These savings plans are meant to assist with any of a child’s college tuition cost by the time they are ready to enroll in a college.

You don’t have to be a resident of any one particular state to enroll in that state’s 529 plan. However, it may be best to see what options are available in your home state’s 529 plan to get the best deal for you and your child. You also earn tax credits and tuition credits with these types of plans.

Open a Custodial Account The UGMA or Uniform Gift to Minors Act allows parents to transfer funds to a trust for their minor child. This is known as a custodial account. Any money that is transferred into the custodial account belongs to the minor but is managed by the appointed custodian. This is until the minor becomes an adult. One benefit of a custodial account is that all income from the account is taxed at the child’s rate. The child’s rate is often lower. Visit a Merck EFCU branch or contact us at 732-594-3317 to open an account.

Another way to offset the cost of higher education? Merck Employees Federal Credit Union is proud to be giving away five (5) $5,000 scholarships to members attending college in the Fall. Application deadline: February 28, 2021. For more information and eligibility requirements, visit

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