Some Options To Assist You In Saving For College

2007-03-08 10:33:40

( Financial )



The most common college savings program that exists in every state is called the 529 college savings program. Any amount of money that you use to save for college is not subject to federal or state taxes.

The money that you choose to set aside when saving for college can be used for investment purposes, so that more money is earned while the child is young.

Another option for saving for college is to obtain a prepaid tuition plan. These schemes allow you to purchase a number of shares equal to the cost of a school’s semester or a school year. These shares will guarantee that the amount that you invest for a college education today, will be equal to the cost of a semester’s or a year’s college education at the time you use the funds. A prepaid tuition plan is guaranteed by the local government, and will provide you the same advantages as a 529 college savings program. If you intend to apply for additional form of financial aid, you should not apply for prepaid tuition plans, as this will lower the total amount of financial assistance that can be given to you. You can however, add the amount that you have invested into a prepaid tuition plan, and open up a 529 college savings plan to gain more benefits, provided it is done before your child goes to college.

Anyone can make a contribution to your college savings plan when saving for college; however it is worthwhile to note that the earlier you start saving for college, so that you can deposit smaller amounts into the account.

When the child grows, and makes a decision not to go to college, the individual who originally set up the account can withdraw the funds invested, for as long as a certain amount is paid for penalty and income taxes. Alternately, the account holder can transfer the funds to another beneficiary to avoid paying taxes.


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