Increase your ESA contributions today

It stands to reason that increasing the amount you invest can mean more money in your coffers in the future. Now that the contribution limit for Coverdell Education Savings Accounts (ESAs) has increased, the potential of this investment vehicle to accumulate funds for education needs has also increased.

ESA investors were limited to $500 annual contributions prior to 2002, greatly limiting its investment appeal. By contributing the limit at the beginning of every year with an 9% yearly return, a student would have amassed $22,509 for college related expenses in 18 years. While that may seem like a significant amount, increases in the fees and expenses associated with a college education could quickly deplete the account.

Now that the annual contribution limit has increased to $2,000, the ESA has become a much more attractive investment vehicle when planning for a college education. Doubling your yearly investment has the potential to double the proceeds in 18 years. By increasing that yearly investment to $2,000, an 9% return could mean $90,037 to pay qualified education expenses in 18 years. That may not answer all the monetary questions surrounding an education, but may provide additional funds to meet education expenses as they come due.

If you are currently making contributions to an ESA, consider increasing those contributions to take maximum advantage of the limits allowed by the Act. If you do not have an ESA (and are eligible to make contributions to an ESA), you should consider opening an account as soon as possible. The sooner you begin making contributions, the sooner you can begin planning for a child's education.

Contact your registered State Farm® agent for information about available investment vehicles.

State Farm VP Management Corp Risk/Important Disclosures. State Farm Mutual Funds Prospectus. The State Farm College Savings Plan Enrollment Handbook (PDF 276 KB).

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