Five Ways to Start Saving for College
College education is an important step for paving the road towards a successful future. However, saving for your child’s college education, while high on the list of intentions, can be difficult, especially for those with limited means. Here are five ways you can start a college fund:
• State-sponsored college savings plans
• Education savings account
• Traditional or Roth IRA accounts
• Alternative savings programs
• CD’s or traditional savings vehicles
State-sponsored plans, like the 529 Savings Plan, offer parents the ability to save for college, without facing taxation or negatively impacting your child’s ability to receive federal aid. Each state’s plan requirements differ, however this is an excellent way to save.
The Coverdell ESA (education savings account) offers tax-free savings, up to $2000 per year per child, and can be used for all educational expenses. One benefit of the ESA is the ability to control where savings are invested throughout the life of the account.
The IRA (individual retirement account), traditional or Roth , can be used to set money aside for college. With the Roth IRA, the funds can be withdrawn any time, penalty and tax-free, and make a great investment tool for funding college.
There are many alternative college savings programs springing up, such as Upromise and Futuretrust, which forward funds to a 529 account whenever you make purchases through their participating retailers. While this isn’t a huge cash cow, every penny helps.
The simplest way to save for college is through your bank, with normal savings accounts (money market accounts average a better rate of return), or with CD’s (Certificates of Deposit), if you’re able to start saving earlier in your child’s life. While they don’t offer the same benefits, and advantages, the savings account is easily accessible, and not penalized and taxed if you use the funds for something other than college.
There are many choices when saving for your child’s college education. All you need to do is get started. The sooner you begin to save, the more you’ll be able to contribute and help to better your child’s chances of future success.