 Ladies and gentlemen, boys and girls and children of all ages, this is The Prince of Investing. I'm Gell's Prince Dice, coming all the way live from the beautiful state of Denver, Colorado, via Think Tech Hawaii in Hau'u, Hawaii. So the people that we're catching this live in Hawaii, don't forget to hit the like and subscribe comments, share button, follow us here on Think Tech Hawaii. Every other Friday, people that's catching a playback, maybe on the podcast, YouTube channel, or having me catch this across the globe, don't forget to hit the like and subscribe comment and share button. But as always, I don't have a lot of time, and I definitely, you guys and girls, don't have a lot of time, so we're going to jump straight into it. So this video is going to be, as you guys and girls can see in the description box, this video is going to be about five to nine plans and Coverdale plans, Coverdale ESA, which is Educational Savings Accounts, in case the savings didn't count. So we're going to talk about the five to nine plans. We're going to talk about the Coverdale ESP. So we're going to talk about what are they, the difference between them, the pros and cons of each, and how they break out, and kind of see which one better function. But let's first start off with what they take off, is even the Coverdale Auto Five to Nine, why we've been comparing. Both of these are what we know as college plans. We all know that one day we want to send our kids, children's and nephews, to college one day, that's everybody's during, right, or some way of further education. So a lot of us, we don't think about that until we're like, you know, junior year, high school, sophomore year, high school. You're like, wow, my kid is very smart. And they ask me for college money and I don't have it. So what you want to do is to increase the time horizon. Time horizon is how long you plan to invest. When you increase the time horizon, instead of waiting until the child is a sophomore, maybe you start when they are at first. As soon as they get a social security number, you can start a cosplan for them. Now, sort of cosplan for them, that gives you more time of compounding interest, that gives you more time to invest, and that gives you more time for your, for you to earn more money. Now Prince, okay, you know why I'm buying stocks for my kids. I am invested in real estate. I have a business for them. I got a savings account for them. Why do they do I need a college plan? So the first question answer is why do you need a college plan? Is the covered their ESA and the 529 plan, both, or they have tax advantages. What I mean by that is, let's say myself, I have a brokerage account. I have a brokerage, I have a custodian account open for my son. I place money in there. I go out and buy different stocks, whatever stocks does well over time. He earns money, right? He earns money, now he turns 18, 19, 20, I decide to sell those assets, those stocks or whatnot, and to sit on the college or pay for education, have them start a business or whatever. When I do that, I'm going to be subjected to taxes. If I made 10, 20, 30, 40, 50 dollars, thousand, 10, 15, 20, 50 dollars a month, whatever you make, now that money is subject to tax. So what these plans do is they let you put money into it. Let the money grow tax-free and as long as it's used for education, it can be used as long as it's used for education, you can use the money tax-free. So your money can grow in a little tax shelter or tax haven. Some people like to call it. So it's like this little place you can place money. You don't have to worry about taxes. I'm going to go to the pros and cons. So first of all, what is the covered their ESA? Covered their ESA is a formal college plan, right? If you're single, the the max level of income you can make to build a qualified to use one is 110,000 dollars. 110,000 dollars if you're single, two hundred and twenty thousand dollars if you're married, you know, one 10 plus one 10. The limit you can place on this thing the year is two thousand dollars. Now we're going to kind of switch years to the five to nine plan. The five to nine plan literally doesn't have a limit and is dictated by your state, the state that you purchase the five to nine plan is ran by the state, the state decides that. But we can go up to like three hundred and some thousand dollars, but pretty much, pretty much has no limit. Unlike the court cover there has a particular limit. So it doesn't have a limit. The second thing about the limit you can put in an amount of money you can put in there. You pretty much can put as much money or the amount of money you want to put in there, but you have to be weary of the gift tax. Anything go fourteen thousand dollars per person. So if you put over fourteen thousand dollars, you could be subject to gift tax. I'm not a CPA, so I'm not going to get died to and to in death with that. But if you can put way more money into a five to nine plan, then you can cover their plan, right? So the next thing is a five to nine plan can only be used for college, right? For a prime example, your son or daughter wants to become a doctor or a lawyer or a dentist, maybe go to trade school, anything like that. And kind of sidebar for a second, let me sidebar. What I mean by that is a smaller thing that I'm seeing people do instead of sending a kid go to a university or whatever, Denver, Colorado, whatever, whatever university and walk into debt, right? The kid is using credit cards, you know, struggle or whatnot. They walk into debt, they walk out of college or a hundred thousand miles and they only look for a job. The only thing you get a job that pays them, you know, $12 an hour, $13 an hour, $15 an hour. So essentially, by the time they are paying back the student loans, you take away the hourly wage to make it like 12 bucks an hour. When it's like, is it really even worth it? I'm already starting with a ball and chain. So a smart thing I am seeing people do is that they're going to college and they're going instead of going to a traditional 40 university, which is very expensive, they're starting off at a community college first. But the community college is way cheaper. Go to a community college, get on a social degree first, way cheaper, then transfer to a community college or a junior college and then go to a major university and do that sophomore, do that junior and senior years so it cuts back on price. Another option I'm seeing people do is this is a kid to tech schools to gain a skill first so they can enter the workforce, start earning money to pay for their schools so they don't have to get into debt. What do I mean by that? Things like being a plumber, things like being an electrician, things like being maybe a dental assistant, you know, those courses that offer do technical college. You can go there, take a year, maybe a year and a half or two years. I'm going to talk about HVAC, HVAC, like the HVAC person. It's like a year of some change. They become very good with HVAC. They can start working at HVAC field instead of working at McDonald's while they're in college making eight, nine, ten hours an hour. These people are making upwards up to 15, 20 hours depending on where you live. They're making a substantial amount of money. Now they can pay for their own school to send themselves to school to get a college degree without getting into debt. But that's another subject. But anyway, so you have to use it for college. The five to nine plan, you have to use for some form of college for it to be tax-free. If you don't use it for college, now you're going to be subject to tax. Let me take a swig of water here. I'm going to invest a short term. I don't think I know about it. But anyway, the point is you have to use it for some form of college. You can't use it if you don't use it for college. Let's say if you're saying, hey, you know what? My son was an idiot. He went to jail and I've had this one into a five to nine plan. And what am I going to do with it now? Now, one of the benefits is you can transfer it to someone else in your family. Transfer it to your son, transfer it to your daughter, you know, your other daughter, your other sibling, a niece or a nephew. You can transfer the money that doesn't have to just sit there and die. Now, with the Coverdale ESA plan, you must establish it before the child is 18. Before they're 18, and it must be used by the time they're 30, right? You must establish it before they're 18, and it must be used by the time they're 30. And it's the same where you have to use it on college as well. If you don't use it on college, you can pay like a 10% penalty and you have to pay a 10% penalty. And you could, not only have to pay a 10% penalty, you have to pay taxes on the money that you use if you don't use it for college, right? One second. I thought I had to speak to you there for a second. So, what you do is, now, another thing, if I do not play, you have to use it for college expenses. That means if your kid goes off to college, son or daughter goes off to college, you have to use it for college expenses. Now, for a Coverdale plan, you can use it for private school. You can use it from K through 12. You want to see the kids in private school, maybe you want to, you know, that's kind of the biggest thing I know if you can do with using it from K through 12. Now, the other thing is the Coverdale plan, you have more options. You can almost use it like an IRA. You know, you can go open up an IRA with T Ameritrade, Scott Trey, and buy stocks that you pick. You can do that with the Coverdale, ESA. But you cannot do that with a 529 plan. When you get a 529 plan, the state already have investments that it wants you to go into, right? I'm going to get into the pros and cons at the end. So, the state has, oh, well, this is going to be good. We have seven funds, two from the seven funds, that sort of deal. So, you don't have that much control. Then some people are saying, well, I don't need that much control, so, you know, that depends. Now, also, the 529 plan, you can start at any age and give or use at any age. You can start whenever you want to, and you can use at any age. You can give it to any beneficiary you want to. But the Coverdale, ESA, you don't have that option. Now, the other thing you have to think of is, with the Coverdale plan, right? Let's break it down to the principle, what would you do? Right? Me personally, I'm not big on either one of the college plans. This is why. Because from what I know and see, it doesn't do anything. Also, something's always better than nothing. But I don't like to be pigeonholed to what do I have to spend the money on. So what is qualifying for education? Let's say my son wants to start a business. And since his son or daughter wants to start a business, and they want to, you know, use the money that you saved up to buy XYZ. Yes, I get tax breaks, but I don't like that fall in chain kind of like, hey, you don't have to use it for this. You don't have to use it for that. Right? So I don't like that. The second thing is, I don't like... The second thing is, I don't like the... On the 5-2-9 plan, these particular funds, I looked at some of the funds, and their fees were ridiculous, right? I mean, the fees were astronomical. And really, I don't say they're astronomical because I'm comparing them to other fees that I see out there. For example, the index fund that I purchased, some index funds are now zero. I heard that Fidelia has zero fund index, but they're not open to other platforms. So I can't see them. But I know there's a Charles... There's a Charles squad. The thing is Charles squad. Charles squad index fund is like 0.02. 0.02. And I looked at some of the 5-2-9 plans. I looked at some of the expenses. It's different from every state. It can't be every state. It has to have changed from the two years ago that I looked at it. But last time I looked at it, some of those things were charging 0.67. That's like someone who's charging you 2 cents versus someone who's charging you 67 cents. So that's crazy, right? So, I mean, that's crazy when you look at the funds. So looking at the fees, I don't like the fee structure. They were pretty much the same funds. So I didn't like the fee structure that I saw in the 5-2-9 plan. Cover deal. It's not bad, you know, that you can put money into it and you can direct it. I like that aspect. But what if my son or daughter doesn't want to go to college, right? Except they want to start a business. They want to get real estate. I really want to get a real estate license. I think it'll pay for your professional license. Let's say I want to get a real estate that you have $30,000 that stays up with me and I want to get a real estate license and I want to buy my first property, right? If they say that I want to get a real estate license and buy my first property, what do you do? You know, if you have that college fund that isn't qualified, that I want to start my own business or whatever, you can't do that with either one of the college funds. If you save up your own money, you have a custodian account. Yes, you're going to have to pay taxes, but it's free on what that child can be able to do. You probably can put it in a way to where this isn't his name. You can go to this tax level, which could be relative to nothing versus your tax level, which could be wherever you're at in life. It could be, you know, astronomical. So I don't like to fall in chain on, hey, this is what you can do with the money. It only can be used for this or this or what not. And also, college firms, I know people were kind of speaking about this. It could affect your ability to get financial aid because, you know, financial aid is there to aid people financially, not for someone who's privileged enough to ask someone who looks out for them at a young age or whatnot. So those are two different things that I look at the Corbele plan and also the 529 plan. Great plans. They're better than nothing. You have tax advantages as far as, hey, if I went out and saved up my own money or I purchased a house for this person or whatever the case can be, you do have investment vehicles that can grow tax-free. Think about your money growing tax-free. Instead of paying money on a royalties or whatever the case can be, you could be earning money over time. Now, the other thing that I... I mean, so if I had to lean towards one person, personally, personally, the most popular one I did that year was the 529 plan because it has unlimited on how much income you make that you qualify for. And also, you can use it as a child goes to college. It has no limit on it. But the downside is, depending on what state you file in, you can only be subject to so many investments. That's my downside. Now, the other Corbele plan, Coverdale plan. Coverdale plan, what I like about it is self-directing. I can pick out investments. I can buy stocks. I can do whatever I want to do to grow the money just like I would do on a self-directed IRA. Now, the downside to that is you only can put $2,000 a year to a Coverdale plan. And also, it has... You only can make $110,000 if you're a single person, $200,000 if you're married, filing jointly. The only downside to that is it has to be used by a kind of child that's 30, and it has to be started by the 18. So I don't like the... I'm not a big fan of the age restrictions, the income restrictions. And of course, for either one of them, I don't like the plan as far as being able to go to college. You know, the kid has to go to college. You never know what your kid may grow up into. They may become interested in or whatnot. They may want to... You know, like I said, one of the things is, you know, how people want to become entrepreneurs and things like that. So, you know, but those are things. This episode and like this whole platform is here to educate you on what is out there. So, you know what you have out there. As far as you know that, hey, you know what? I heard this guy, this Google-leading guy was talking about a Coverdale plan, and a 529 plan, a college plan. What exactly is a college plan that's different from what I'm already doing? You know, I am already purchasing this on my son, or I'm already... I already have a savings account. It beats a savings account because it isn't invested in a vehicle. You can't invest. So, and it beats a custodian account in a way because it beats a custodian account because of the tax. You have a custodian account. I got you for my son. I bought stock that you guys can do all the time. It doesn't mean that he... just because he has a custodian account, he will still have to pay tax for them. So, you get tax advantages from it, and that's the only good thing. But either way, both of them, you're going to have to use it exactly for college. And that's one of my big things about... What if? What if? What if? What if? I don't like that red tape on my money. So, anyway, it's just like my IRA, my 401k, you know. I'm 59 and a half. I don't want the government to say, hey, you can use your money that you saved and invested but you're only to use it for food and clothes. What? Well, what if I want to buy a car or I want to go do XYZ or I want to start a business? Whatever. So, anyway, that's your money. You save it. You invested it. It should, yes, definitely theoretically go to your cost savings, but what if your kid doesn't want to go to a cost savings? A lot of people are not going to spend your day. So, I like the free one. Well, and I like the government to say, hey, you're going to get charged 10% and tax, and then you do this or whatever. So, that's just me. But anyway, that's going to conclude this episode. The 529 plan versus the Coverdale plan. I hope you guys took some away from it from the people that are catching the audio experience and the podcast, the people that are catching the live, to the people that are catching the playback or how you make catches around the globe. But as always, this is The Prince of Investing. My name is Prince Geis. I'm to the next video, podcast, cartoon, book or whatever else you seem to do crazy around the globe. Oh yeah, before I get out of here, I'm not going to say it. I'll wait till we have another time. But anyway, peace, be safe, I'm out, and thank you.