Saving For College
The key is start saving money for college as soon as possible.
Some parents start saving immediately after their child's birth.
This tact is not realistic for many families, however. If you are or your child is headed
off to college this year, there may be little you can do at this point.
Starting savings for younger siblings may be an option.
Methods of saving for college
There are several savings vehicles available for financing college.
They each have different rules and restrictions as well as tax implications.
The general benefit of savings vehicles is that they allow compounding
tax-free. That is, you can earn dividends and capital gains and then
reinvest the money without having to pay taxes on investment income/dividends
each year.
- Educational IRA: You invest in mutual funds and pick the asset allocation
- 529 College Savings Plan: You invest in mutual funds; in many plans, the asset allocation
varies by student's age)
- 529 College Savings Plan: Prepaid tuition, where you buy tuition units at today's prices
There are also conventional saving in the parents' name and savings in the child's name. Having savings in a parent's name or a child's name will impact both
income taxes as well as expected family contributions.
Seeking more assistance
Please contact us for additional information on financial planning services.
