Financial Planning



TheUnited States have a variety of financial alternatives that parentsor guardians can use to save college fees. Among the popular methodsinclude the College Savings 529 Plan and the Uniform Gift to MinorAccount (UGMA). The objective of this essay will be outlining thebenefits of the 529 plan over the latter.

CollegeSavings 529 Plan money is absolutely dedicated for education purposeof the beneficiary. The Custodian takes care of the investment untila minor reaches the adult years, which could be either 18 or 21 yearsdepending on a given state. As such, it ensures that the college feesis not redirected to other personal uses such as buying a home or acar (Feigenbaum &amp Morton, 2003). On the contrary, the UGMAaccount requires a custodian to take care of the account until thebeneficiary reaches the majority age. The kitty is then passed on theindividual, and he or she can use the money for any purpose(Brewster, 2014). Unfortunately, some beneficiaries misuse the fundsinstead of using it for education purpose. Subsequently, students mayfail to complete college after they abuse the fees.

Thesavings 529 cash is tax free. Besides, some states also exclude thekitty from federal income tax when the cash is directed towardspaying for higher education. This implies that the investment in theaccount grows without being subjected. Conversely, UMGMA savings arespared federal and state income tax up to a certain amount that isdeposited prior to the death of the sponsor. This means thatbeneficiaries of the 529 kitty will be higher than the latter as ithas no deductions (Brewster, 2014).

Nevertheless,students that opt to use 529 plans also have disadvantages such asthe money can only be used for financing education. Second, studentsthat have the savings plan are highly unlikely to receive financialaid. Finally, the investment options are highly restricted(Feigenbaum &amp Morton, 2003).

Savingplans available California

Thereare available in two main forms. They include the prepaid plans andthe savings varieties.


Brewster,S. (2014, 20 June). Money Pros: How to choose between a UGMA/UTMA anda 529 plan when picking a college savings tool. NewYork Daily News.Retrieved from

Feigenbaum,R. A., &amp Morton, D. J. (2003). The529 College Savings Plan (2nded).Naperville, Ill: Sphinx Pub.