Getting More From Your Money: Part 2

An Educational Savings Account. These fall under the same jurisdiction as IRAs, but the difference is already obvious. Now don't confuse the ESA with the 529 Plan offered by most states. The 529 has its own benefits but ca only be used for higher education (college and higher) and is just much more complicated than the ESA.

If you intend at all to save money for your children let me herein beg of you to do them a favor and save this way. I see far too many people come in and open up regular savings accounts for their children (or worse yet they use a piggy bank at home--poor idea). Using an ESA rather than a regular savings account (or piggy bank) has a number of advantages.

#1. Contributions made to an ESA can be tax deductible. Neither the piggy nor the savings can offer this. They grow tax deffered and, if used on educational purposes, you never pay taxes on the money in an ESA.

#2. The money in the ESA grows risk free and is federally insured.

#3. The money in an ESA earns (typically) 2 to 3 times what a normal savings account will earn, and often earns more than that!

#4. There are no minimum balances or terms. If your current financial institution imposes terms (meaning you can't take the money back out before a certain date) or minimum balances, this is entirely your institution and not a function of the ESA. Go look at other institutions in your area that offer regular no minimum no term ESAs. The only requirement that comes with the ESA is a $2000-a-year cap on the contributions to it and the funds must be used for educational purposes.

#5. Anyone can contribute! This means birthday money from relatives, anything can go in.

#6. Finally, an educational expense is as simple as it sounds. Anything you can construe as an educational expense allows you to use that money tax free! Use it for school lunches. Use it for tuition. Use the money for school clothes or a new computer for the home that the child will be using for school. Use it for field trips. And the list goes on.

#7. Rather than just being used for higher education, the ESA can be used beginning at kindergarten and continuing through schooling up through the age of 30.

So, I hope you all paid close attention because anyone saving for their children in any other way is doing them a disservice. You'll get 2 to 3 to 4 to even more times the money in an ESA than in a savings account. It will even earn more than a lot of CDs and you'll have no terms to wait for and you'll never pay taxes on a cent of the money if used for educational purposes! It really is as easy and as awesome as it sounds. It's strange to me that it has remained so unknown. So next time you think of turning to the savings account or the piggy bank, think again. There is a lot you can do for your children, and there is a lot you can do for them that's a lot better than what a lot of the world is doing. That's a lot of lots.