Start Saving Early: Give The Gift Your Baby Won't Grow Out Of

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When my friend, Gina, recently invited me to her baby shower, I gladly accepted her invitation and asked her where she was registered. She mentioned a few of the usual suspects, and then said that what she really wanted was a way to ensure that she one day could send her baby to college. That got me thinking, so I contacted my financial advising team, Mike & Mike.

When I asked Mike & Mike about how to best address Gina's wishes, they came up with a unique gift idea for your next baby shower or other important event that offers three different options to suit your desire.

Their "Gold Package" consists of a Section 529 College Savings Plan to fund the higher-education expenses of your child. The earnings grow tax-free, and the withdrawals are also federally tax-exempt as long as they are used for qualified education expenses (tuition and fees, room and board, books, etc.).

The "Silver Package" offered by Mike & Mike has no restriction on the use of funds except that the money must be used for the benefit of the named child, and the "custodian" controls the account until the child reaches "vesting age", typically 18 or 21. While this account is more flexible than the 529 in that it could be used for primary and secondary school expenses, it is even more flexible because the child-turned-adult would be free to spend it on anything, including a first home purchase, new car, or wedding.

The "Bronze Package" is made up of an Education Savings Account. This is an account created for paying the education expenses of your child, from kindergarten through graduate school. Friends and family can contribute up to $2,000 per child per year, though there are income limitations that determine who can contribute. The earnings grow free from federal taxation, and the withdrawals are also federally tax-free when used for qualified education expenses.

I told Gina what I had learned, and she loved the idea of creating a Gold Package for her daughter. With the help of Mike & Mike, instead of giving outfits or toys that her daughter would outgrow within a year, friends and family now have the option of giving a gift that will have a much longer-lasting impact. They simply send in a contribution to the 529 Plan created for Gina's daughter, and they then receive a "Gold Package" certificate from Mike & Mike that they present to Gina at the baby shower.

Providing access to higher education is now more important than ever. Why not give your child a gift they will grow into, an investment in a plan that provides an education they can build on to create a better lifestyle and a more secure future.

For more information on how to create one of these packages for yourself or for a loved one, feel free to contact Mike & Mike at 213-435-9960.

Fast Facts:

- The average income of a college graduate is 60% higher than that of a high school graduate.

- The average college student today graduates with debt exceeding $20,000.

- Right now, 1 in 5 college graduates change career plans, 2 in 5 delay buying a house, and 1 in 5 delay having children, all as a result of heavy student loan debt.

- In 18 years the average private school will cost $74,094 per year.

- Saving $250 per month for 20 years while earning 7% interest would yield $109,137.