Every parent wants to give their children the best. One of the biggest and most expensive challenges is sending them to university. A university education is critical. It can help your children get better jobs with higher pay in the future.
Tuition and fees are rising fast. In the US, the average yearly cost was $24,610 for public colleges and $49,320 for private colleges (2016-2017). If you live in the US, you can also consider sending your children to study abroad. In Europe, tuition fees are generally much lower. They average around €4,500 a year for European students and €8,600 for non-Europeans. But many programs are taught in local languages, so knowing the language is important.
Athletes often retire before their children go to college. Since athletes earn high incomes for a shorter time, and interest rates are low, it is crucial to start saving early and save more. This helps provide for your children’s education.
Because education costs vary widely between the US and Europe, the US offers more options to save for college. However, some savings methods work everywhere:
Life Insurance
You can use life insurance to fund education. It also guarantees funds if you or your spouse die early. Cash value life insurance is best. It offers permanent coverage with a savings component that grows tax-free. Your child can use the funds when college starts, or you can borrow from the savings at low interest.
Custodial Account
A custodial account is a savings account in your child’s name. You control it until your child becomes an adult. You can deposit or withdraw money freely for your child’s benefit. However, you cannot change the beneficiary once set. Your child gains full control as an adult, even if they don’t study. Custodial accounts are taxed at normal rates.
In the US, two more popular options exist:
529 Plans
Every US state offers 529 plans. These are mutual fund portfolios with tax benefits for education savings. There are two types: prepaid tuition plans and savings plans. Prepaid plans let you pay tuition in advance at specific schools. Savings plans work like IRAs with tax advantages. You can use 529 funds for overseas universities if they qualify.
Coverdell Accounts
Created by the US government, Coverdell accounts help families save for education. They are for anyone under 18 but must be used by age 30. You can contribute up to $2,000 a year, but the money grows tax-free. Withdrawals are tax-free if used for qualified expenses. However, high earners (over $110,000 single or $220,000 joint) cannot contribute. This limit makes Coverdell accounts less attractive for some athletes.
No matter the method, start saving early—ideally at birth. Every dollar saved means less to borrow later. Remember, sports careers can end unexpectedly. Planning now can secure a better future for your children through education.