Starting a savings account in your child’s name can seem like a great idea when they are young. However, it could be a decision that you regret.
Choosing the wrong savings plan now could end up causing them to miss out on thousands of dollars in avoidable taxes and missed financial aid when it comes time to pay for college.
When it comes to determining financial aid, there is an asset protection allowance, or APA, that protects a portion of the parents’ assets. The students’ personal income and savings actually have a bigger and possibly more negative, impact on how much financial aid is available than parental assets and income.
Since the amount of financial aid is established based on the income and assets from the year just before applying for aid, a student with a large amount of savings in their name could end up forfeiting a sizeable sum of free college money.
Fortunately, quite a few ways exist for parents to save that will not put their children’s future financial aid at risk. Here are a couple of places to safely stockpile cash: Read More