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Saving for College: Understanding Your Options

| November 09, 2017
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Going to college is expensive. According to the College Board, tuition and fees are rising faster than financial aid and income, making it even more difficult to pay for college. 

That’s why it’s important to start thinking about setting funds aside for college as soon as possible, whether it’s for a child, another family member, or for yourself.

If you have looked into education savings accounts, 529 plans and Coverdell Education Savings Accounts (ESAs) have likely come up. For many people, these are the go-to high school and college savings accounts.

529s and Coverdell accounts require funds to be used only for educational expenses, which may be fine, but there is a possibility that whoever you set up the account for chooses a path that doesn’t include a formal college education. For example, your child may choose to pursue a profession that doesn’t require a college degree—maybe he chooses to work as a carpenter’s apprentice and eventually start his own carpentry business. If you do not have another child or beneficiary to roll the money in the 529 or Coverdell account to, those funds are locked up.

These accounts certainly have their benefits, and can work very well for some people. In some cases, we do recommend 529 plans to clients. The following people could benefit from 529 plans:

  • Grandparents who want to provide educational funds for their grandchildren.
  • Very high-net-worth individuals who have already used many other options.
  • People for whom permanent life insurance may not be an option due to health reasons.
  • People who prefer to set funds aside in a way that ensures they can only be used for education.

Generally, we do not advise clients to open Coverdell ESAs due to the restrictions on beneficiaries, limits on contributions, and earnings phaseout.


At Pinnacle Financial Advisors, we offer alternative approaches to planning for secondary and further education. We can teach clients about tax-advantaged savings strategies that don’t limit the funds they are saving to just college education. 

Our goal is to provide our clients with optimal flexibility for whatever unexpected changes life brings. We want to help you do what you need to do when you need to do it.  

No college savings plan is one-size-fits-all. We are happy to review a variety of insurance and investment options customized to your unique circumstances.

Of course, if you already have a 529 or Coverdell account, we can help administrate it and integrate it into your financial plan. The Pinnacle team is here to help you create a financial plan that keeps up with life’s unexpected changes, whether those plans include college education or not.

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