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Ask Dave

Children's Education Savings Not Growing?

Tamara is disappointed in how her children's savings have been growing. Where can she put it to do better?

QUESTION: Tamara has 4 children and has been saving for their education with an ESA in a savings account at her local bank.  The savings have not been growing.  What’s the best way to invest the money for their education?

ANSWER: The ESA is not an investment.  It has to do with the way the investment is treated for taxes.  The ESA only wraps around the investment to keep it warm from taxes.  In your case, you wrapped the ESA around a bad savings account. You should have that money in good growth stock mutual funds.  Then qualify the mutual fund as an ESA and use the money for your children’s education.