From the time children are born (and even before), parents start worrying about how to pay for college tuition. Through college savings plans, savings accounts and even life insurance, you can begin adding money to your child’s college fund.
No matter what method you use to save money for your child’s college education, start as early as you can for the best growth potential. Investigate all your different options and determine the right plan for your family. By having the payments deducted automatically from your checking or savings account each month or pay period, you’ll be able to assure that you won’t miss a payment.
Consider a 529 college savings plan
The 529 college savings plan is specifically designed for saving for college tuition and other education expenses. In most states, contributions to a 529 plan can be deducted from your adjusted gross income, providing a tax savings. Additionally, the earnings are exempt from federal taxes as long as the funds are used on eligible education expenses. With a 529 plan, your child can go to college in any state, so these plans provide geographical flexibility.
Open a prepaid tuition plan
We all know how fast tuition costs are rising. With a prepaid tuition plan, you don’t have to worry about that. Basically, you make fixed payments for a specific period of time and the state guarantees the cost of tuition so you can forget about tomorrow’s prices by locking in today’s rates. The rate guarantee applies only to in-state schools. You select a plan that covers from one semester to four years. Like the 529 plan, the prepaid tuition plans are tax-deductible for your state taxes. Plus, the earnings are free from both state and federal tax.
Start an Education Savings Account
A Coverdell education savings account (ESA) allows you to contribute up to $2,000 per year, per child, to as many accounts as you establish (the maxiumum amount is expected to be reduced to $500 per year at the end of 2012). Contributions to an ESA are not tax deductible, but amounts deposited in the account grow tax free until distributed. Distributions are then tax-free as long as they are used for qualified education expenses by the time the beneficiary is 30 years old.
Check out the Gerber Life College Plan
This option is both a way to save for college and adult life insurance. At the end of the term, the policy is guaranteed to pay out your choice of $10,000 to $150,000, as long as premiums are paid, for your child to use on college expenses or anything else. The Gerber Life College Plan offers affordable, fixed payments and stable growth. You save a fixed amount each month throughout the term and, during this time period, the parent also enjoy full life insurance protection.
More about family finances
Please note: Articles and other information included on this website are intended for the general interest of our readers, and are not intended to provide, and do not constitute, legal, financial, health or other advice. Gerber Life makes no claims, representations, or warranties as to the accuracy, completeness, or appropriateness of this general interest information for your particular circumstances. If you need legal, financial, health or other services, you should contact a duly licensed professional.