No matter how young your child may be, now is the time to start saving for their education. Here are a few excellent ways to start saving now.
One of the best ways to save money when it is time to withdraw funds for your child’s education is with a Coverdell Education Savings Account. You can contribute up to $2000 annually until your child reaches eighteen years of age. The deposits are not pre-tax, but the funds are not taxable upon withdrawal as long as they are used for education.
529 College Savings Plans are among the most popular educational savings programs. There are two different types of 529 plans available. The 529 College Savings Plan allows you different options for investing and your investment returns are not taxed as long as the money is used for education expenses. The second 529 plan is the 529 Prepaid Tuition Plan. It works sort of like prepaid fuel oil purchases. You pay tuition based on the current cost and the plan allows you to hold that cost until your child begins attending college.
If you invest in special Savings Bonds for Education early enough, they can prove to be a good option for saving toward your child’s education. The program allows you to invest in bonds that can be withdrawn tax free if used for educational purposes. You can, however, cash out the bonds in the event of some financial crisis, but you’ll have to pay the taxes on the withdrawal since you are not using the funds for education.
If you have an older child and you are concerned about their college education because you have no savings in place, there are deductions, tax credits, and exemptions for which your child may qualify before and after enrollment. For example, The American Opportunity Tax Credit has been improved and extended. There is also the classroom expenses deduction, higher education tuition and fees deductions, as well a
It is important, if at all possible, to get a head start on your child’s higher education costs. Tuitions and fees are reaching dramatic highs and as your children grow older, these cost promise only to rise. One of the most important financial investments you can make as a parent is in the future education of your children. Research and plan as far in advance as you possibly can in order to take advantage of the best programs available for your child’s education.
Perhaps you should begin preparing for those education costs now, by consulting a financial planner. A financial planner can give you top-notch recommendations on how to invest now, in order to guarantee your child’s educational future.
Chintamani Abhyankar, is a well known expert in the field of finance and taxation for last 25 years. He has written many books explaining inside secrets of the magic world of personal finance. His famous eBook Stop donating your money to IRS which is now running in its second edition, provides intricate knowledge and valuable tips on personal finance and income tax.
