Education Plans

Secure Their Future with Smart Financial Planning

At Dharma Life & Wealth Advisors , we believe every child deserves a future filled with opportunities, and that begins with strong educational support. Education can be costly. Tuition, books, room, board, and tech expenses can add up quickly. The good news is that with the right savings strategy, you can plan for your child's education while keeping your financial stability intact. Whether you're saving for private school, college, or postgraduate education, our goal is to help you explore your options and create a personalized plan that grows with your family.

Education costs are rising faster than inflation, with college tuition increasing by 5 to 7 percent every year in many places. Starting early, saving consistently, and selecting the right savings option can make a big difference over time. The sooner you start, the more your money can grow through compounding interest and smart investing.

Our team can help you:

• Understand your options
• Estimate future education costs
• Choose the best tax-advantaged plan
• Adjust your investment strategy based on your timeline and risk tolerance

Let’s take a closer look at the most popular and effective education savings plans available today.

Best for: Saving for college and education expenses with tax benefits.

The 529 Plan is a state-sponsored investment account designed for education expenses. These accounts offer a strong combination of tax-free growth and flexibility.

Key Benefits:

• Tax-Free Withdrawals: If you use the money for qualified educational expenses—like tuition, books, fees, and room and board—your earnings and withdrawals are tax-free.
• High Contribution Limits: Some plans allow contributions of up to $300,000 or more per beneficiary.
• Investment Options: Choose from various portfolios, including age-based options that become more conservative as your child gets closer to college.
• State Tax Deductions or Credits: Many states provide additional tax benefits for contributions.

Things to Consider:

• Funds must be used for qualified education expenses, or you’ll incur a 10 percent penalty on earnings plus income taxes.
• Each state’s plan has different fees and rules.

Who Should Consider It: Parents and grandparents seeking a dedicated, flexible, and tax-friendly way to save for higher education.

Best for: Families wanting flexibility in fund usage.

A custodial account (UGMA or UTMA) is set up in a child’s name but managed by an adult until the child reaches adulthood. Unlike a 529 plan, these funds don’t have to be used for education—they can support anything that benefits the child.

Key Benefits:

• No Spending Restrictions: The money can be used for education or other purposes like starting a business, buying a car, or traveling.
• No Contribution Limits: You can contribute as much as you like, although gift tax rules apply.
• Investment Flexibility: Invest in a wide range of assets, from stocks to mutual funds.

Things to Consider:

• Once your child becomes an adult (typically at 18 or 21), they gain complete control of the funds.
• Assets in a custodial account may decrease financial aid eligibility more than other savings plans.

Who Should Consider It: Parents who want to provide financial support to their child with more flexibility beyond education.

Best for: Covering both K-12 and college education expenses.

A Coverdell ESA is another tax-advantaged account that lets you save for both private school and college. Like a 529, it offers tax-free growth and withdrawals for qualified education expenses but comes with more limitations.

Key Benefits:

• Use for K-12 or College: Can cover tutoring, private school costs, computers, and more.
• Tax-Free Growth: Earnings are tax-deferred and tax-free if used for qualified education expenses.
• Investment Flexibility: Choose from individual stocks, mutual funds, or ETFs.

Things to Consider:

• The annual contribution limit is low—only $2,000 per beneficiary.
• Income restrictions apply for contributors.
• Funds must be used before the beneficiary turns 30.

Who Should Consider It: Families with modest incomes looking to save for early education and want flexible investment options.

Best for: Locking in today’s tuition rates at specific public colleges.

These plans let you prepay your child’s future tuition at present prices, usually at in-state public colleges. It’s like buying future education at a discount.

Key Benefits:

• Predictable Costs: Tuition inflation won’t affect you.
• State-Backed Security: Many plans are backed by state governments.
• No Market Risk: You’re paying upfront, not investing in the market.

Things to Consider:

• Limited to participating colleges or institutions.
• Covers only tuition—not books, housing, or other expenses.
• If your child attends a different school, benefits may be reduced or refunded.

Who Should Consider It: Parents who are confident their child will attend a specific in-state college or university.

Best for: Saving for education and retirement simultaneously.

Although not designed for education, Roth IRAs allow you to withdraw contributions (not earnings) at any time. Additionally, earnings can be withdrawn for qualified education expenses without penalty.

Key Benefits:

• Dual Use: If not used for education, you can keep the funds for retirement.
• Tax-Free Growth: Withdrawals for education (under qualifying rules) are penalty-free.
• Flexibility: No required use by a specific age.

Things to Consider:

• Low annual contribution limit ($6,500 in 2025; $7,500 if over 50).
• Income limits apply for contributions.
• Non-qualified earnings withdrawals may incur penalties.

Who Should Consider It: Parents who want education savings flexibility without committing to an education-only account.

There isn’t a single answer that works for everyone. The best plan for you depends on your child’s age, your financial goals, your income, and the level of flexibility you need. Some families may find it helpful to combine two or more plans—like using a 529 for college and a custodial account for other expenses.

When you work with Dharma Life & Wealth Advisors, we help you:

• Compare account types
• Explore contribution strategies
• Maximize tax benefits
• Adjust as your needs change

You don’t have to navigate education savings by yourself. With the right plan and professional guidance, you can make smart financial decisions that support your children’s success without compromising your financial health.

Ready to explore your options? Schedule a personalized consultation today.