Typical financial advice says to save for your child’s higher education costs in some sort of college savings account, the most popular today being a 529 plan. These plans are popular because the money in the accounts grow tax free and can be accessed tax free if used for their intended purpose. Individuals who use these accounts enjoy the compounding values they can experience because of the tax efficiency.
But what happens to the account when your child goes to college? It is drained to $0 – never to earn interest again. Think about a compounding curve line, one of the worst times to interrupt the miracle of compounding is in year 18…precisely when the 529 forces you to drain the account and transfer the miracle to the university!
In this video, Eric discusses how costly these plans can be to your family’s future wealth and compares the 529 to the Family Bank Account where you never interrupt the compounding values of your child’s college savings.