College Savings For Children
June 5th, 2008
Question: Best college savings plan?
I’m 7 months pregnant and I want to start a college savings account for my child. What is the best savings plan that I can set up, but which also gives me a lot of flexibility in managing it and the least amount of fees?
Answer: If you are saving for college expenses, you should take advantage of federal tax breaks aimed at families saving and paying for college. These include the following:
Qualified Tuition Programs (529 plans)—Earnings grow tax-deferred and distributions are tax-free when used for qualified post-secondary education costs.
Coverdell Education Savings Accounts— Earnings grow tax-deferred and distributions are tax-free when used for qualified post-secondary education costs. May also be withdrawn tax-free for primary and secondary school expenses.
However, don’t invest more in these than you chlld will need for college. There are tax penalties for non-educational withdrawals. Additional funds should be invested in a UGMA or UTMA.
For more information read this link, where most of this information comes from:
http://www.savingforcollege.com/
I may also add that you should also be putting the maximum away for your own retirement now in 401k’s and IRA’s, before saving money for your child. If you max out your retirement investments now, you can put in less later on, and have more money to donate to your child then. Also if it turns out your child is not college material, you won’t have to pay the withdrawal penalties from a 529. Your child can always borrow money to fund her college, you can’t borrow money to fund your retirement. Get your retirement squared away first; the last thing your child wants to do is have to support you in your old age, because you didn’t plan ahead.
Senator Steinberg on college savings for foster children
Related posts
Posted in College Savings Plans | 
Tags: 529, college, college savings for children, finance, money, savings