Smart Ways to Save for College

It's Never Too Early to Start Planning for College
We've Got Lots of Ways to Save

If you want your kids to have all the advantages of a college education, it is never too early to start planning how you’re going to pay for it. That’s because college not only costs more today than when you went to school, the cost is increasing every year.

In fact:

	In the past 20 years, the cost of a college education has risen twice as fast as inflation
	Four years of college costs now average over $100,000

Smart Ways to Save

Regular Savings

Ben Franklin said it first, “The only real saver is a regular saver.” Whether you want to open a special savings or money market account earmarked for your child’s education or purchase certificates of deposit for a better rate of interest, Kennebunk Savings has a number of options to set aside funds on a regular basis. We even have special Looney Tunes savings accounts so your kids can participate by putting aside birthday and holiday gifts toward their own college expenses.  Apply Now or Learn More.

Advantages

	Simple to set up and add to
	Can be withdrawn at any time, for any purpose
	No fees for juvenile savings accounts
	FDIC insured
	Parents can maintain complete control by having their own account or a joint account with their child

Custodial Savings Accounts or CDs

These traditional savings accounts allow a parent or guardian to save money in their child’s name. Contributions to this account are made with after tax dollars. Then, depending on the age of the child, some or all of the interest income will be taxed at the child’s rate, which is usually lower than yours. While these accounts don’t offer all of the tax benefits of the other education savings plans, they do afford you greater flexibility in how the funds are used.  For more information, contact Customer Care at 1-800-339-6573 or send a secure email.

Advantages

	Variety of minimum balances and terms
	Interest income may be taxed at the child’s rate
	No restrictions on how the money is spent
	FDIC insured
	Easy access to funds
	However, account becomes child’s property at age 18 to use as they wish

Coverdell Education Savings Account
(formerly called Education IRAs)

Coverdell Education Savings Accounts (CESA) are set up and managed by a parent or guardian. These contributions are made with after tax dollars, but funds deposited grow tax-free until they are distributed, and the child will not be taxed on any withdrawal for qualified primary, secondary, or higher education expenses. CESAs do have income restrictions for contributors and maximum annual contribution limits. We can provide you with the most up-to-date figures. For more information, contact Customer Care at 1-800-339-6573 or send a secure email.

Advantages

	Parent or guardian controls the account
	When the child reaches age 18 you may continue to manage the account or may transfer control to the child
	Earnings and withdrawals are tax-free (when used for qualified educational expenses before the child turns 30)
	“Eligible expenses” include not only qualified higher-education costs but also qualified elementary – and secondary – education costs such as tuition, tutoring, books, supplies, uniforms, transportation, and computer equipment
	Unused funds remaining in the account after the beneficiary reaches 30 can be rolled over into a CESA for a qualified family member to maintain the tax-free status
	CESAs at Kennebunk Savings are FDIC insured
	Contributions for individuals with “special needs” can be made past age 18, and distribution of those funds don’t have to made by age 30
	However, there are penalties on funds withdrawn but not used for education

Section 529 Savings Plans

These are state-sponsored plans that grow tax-deferred until the funds are withdrawn for qualified higher-education expenses. Maine’s program, NextGen®, is administered by the Finance Authority of Maine (FAME) and managed by Merrill Lynch. The plan offers you a variety of investment options – you can select the one that best fits your child’s age and your financial situation. Contributions are made with after tax dollars. For more information, contact Customer Care at 1-800-339-6573 or send a secure email.

Advantages

	Earnings are Federal and Maine state income tax free
	Withdrawals are also federal and Maine state income tax free as long as they are used for post secondary education
	High annual contribution minimums
	Wide choice of investment options
	Not just parents – grandparents, aunts, uncles, and even family friends can open accounts on behalf of the child
	Funds can be used at any U.S. accredited post for tuition, room, board, books, supplies, and other qualifying higher education expenses
	Some or all funds may be transferred to another family member if primary beneficiary doesn’t use for post secondary education
	There are no age restrictions. Do you want to go back to school at age 30,40 or 50? This can be a wise choice for savings
	However, there are penalties on funds not used for education, and principal and earnings aren’t guaranteed

Each of these options provide you with smart ways to start saving for your child’s education. Consider the advantages of each and your own individual situation. Keep in mind that financial aid, student and parent loans, and even your child’s summer job income are important components of any college savings plan. The key to success is to begin saving now and make regular contributions. It’s easy to set up regular contributions from your savings or checking account. Call customer care at 1-800-339-6573 or come into any of our conveniently located offices.