Saving for College
Sending your children off to college is an exciting time for most parents. The opportunities that higher education brings are unlimited. However, there are many cases where an individuals choices are limited due to a lack of planning early on.
You'll want to do plenty of research up front to determine the best savings vehicle for college. You first need to determine how much you can contribute to your child's college fund. It doesn't have to be a lot so don't stress if your child is in their later years. The key is to be consistent even if it's a small amount every month.
There are two basic ways to invest for college. One is an Educational Savings Account or ESA. An ESA has an annual contribution limit of $2,000.00. Your money grows tax-deferred in this type of account meaning that distributions are tax free if used for qualified educational expenses. Your income cannot exceed $110,000 annually as an individual or $220,000 as a couple to qualify for this plan.
The next plan to consider is what's called a 529 plan. Your money grows tax-deferred in this type of account as well but you may contribute up to $320,000.00 total and there are no income restrictions. This would be a better plan for those who are able to contribute more than $2,000.00 per year.
There are other plans and savings strategies parents can use to save for college. I have just given you a couple of options to help in your research to determine what's best for your situation.
A recent survey showed parents number one fear was saving for college. It's important to take note that you shouldn't feel overwhelmed at the thought of saving for your child's future. As stated earlier, even a small amount contributed on a consistent basis will help your child in the long run.
