Paying For College
Someone told me years back that if I wanted to know how much to save for my kids college, look at tuition of the school that is representative of your state, the day your kid is born. Now double that tuition and you have a good idea what you are up against.
It doesn’t matter if college is 2 decades or 2 years away, now is always the time to start putting money away for school. There are literally hundreds of finanical products of college savings. It’s not surprising since college costs rise 5% each year.
I spent about 18 months researching College Savings prior to taking any action. I had Roth IRAs pushed at me. Old timers would push EE bonds. The most popular savings for college these days is a no brainer. In fact, the tax deduction can even be helpful, if you are in between tax brackets. State sponsored college savings plans are the way to go. They are referred to as 529 plans. Unlike most things that have the word government in them, these plans even started to compete with one another and get better with time.
Anyone can contribute to the plan. Grandma doesn’t know what to get Joey for his birthday? How about a cool $50 towards his future that will be $80 by the time he’s ready to use it.
The earnings are all 100% tax free as long as they are used towards education, by the way that includes things like laptops, transportation, board, and books. Many states let you deduct contributions for your State taxes.
There is no time limit on the use of money. So if Junior takes a couple of years to him/her self, it’s not a strain on you.