Student loan debt remains a major issue among Americans, prompting many parents to get a head start on saving for their children's future college expenses. University of San Diego finance professor Daniel Roccato joins Wealth! to discuss the various accounts parents or guardians should consider.

Roccato notes that custodial accounts are "the easiest one" for parents to open. There is no limit on the amount that can be contributed. However, the downside is that when the child becomes an adult, they have full control over the money and may not use it for its intended purpose.

Examining US savings bonds, Roccato explains that the receiver will benefit from years of interest accruing on these bonds, and there's no tax if the bonds are used for education-related expenses. However, he notes that these bonds do carry an income limit.

Discussing Education Savings Accounts, Roccato likens them to an IRA, where the money grows tax-free, and when withdrawn, no tax is paid if the funds are used for education expenses. However, he cautions that there is a $2,000 per year per beneficiary limit on contributions.

Finally, Roccato points to the 529 plan, which he notes has no contribution limit and allows the money to grow tax-free, though the specifics vary by state.

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This post was written by Angel Smith