Saving For Your Kid’s Education

With the introduction and surge in popularity of 529 plans, more and more parents are focused on   saving  for their children’s  college  education. Before you begin, make sure you are contributing enough to your retirement fund. Your children can borrow money for college but you can not borrow money for retirement. Even if you plan on working for the rest of your life, you still want to be prepared in the event you do choose to retire.

Once you have your retirement plan set in place, you can now start preparing for your children’s future. An important decision to make is a Public or Private University for your child. If you feel confident you will be sending your child to Public University, verify if your state has a prepaid  college   savings  plan. Your money will go much further, but your child must use the money for a state university.

If you aren’t sure whether to send your child to a Public or Private University and you want to leave your options open, then the 529 plan is a better choice. There are many great benefits to the 529 plan which include:

o When the money comes out for an accredited college, it is free of federal taxes.

o The money in the 529 plan grows tax deferred.

o Many states offer an upfront tax deduction on your contribution and a tax break when you take the money out (if you go with your state plan).

o The donor (usually the parent) has control.

o Very easy to use and can be made automatic. In fact, if you don’t have the minimum to invest, you can set up automatic contributions for as little as $25 a month.

o Most plans have an age-based investment option that makes it very easy for investors to build a properly diversified investment portfolio.

Visit for more information about your state’s plan. You can contribute up to $12,000 tax-free per child annually or $60,000 spread over five years under the gift tax law. Overall, you can contribute (or the account can grow) to more than $200,000.

Another way to get more bang for your buck is through Upromise ( This company gets you free money for your 529 plan by shopping for everyday things from a long list of vendors (that you are probably using already). Get your family and friends involved. It won’t cost them a cent.

One final thing you can do to make the most out of your child’s  college   savings  plan is to go online and use a savings calculator to see how much you should save. T. Rowe Price ( has a sophisticated yet easy-to-use site. Also, if you are concerned about the 529 plan hurting your child’s chances to receive financial aid, don’t worry. Investing in a 529 plan will have a minimal affect because the assets are in the name of the donor (the parent), not the child.

Source by Galia Gichon

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