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Try out our College Savings Calculator. It will give you an idea of both how much your child's education may cost and how much you'll need to save to get there. And try not to panic, even after you see the numbers. |
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Carefully consider all the savings options. In addition to the Education IRA and Section 529 plans, putting investments in your child's name through the Uniform Gift to Minors Act (UGMA) is still a popular option. The first $750 of annual dividend income is tax-free, and the next $750 is taxed at the child's rate. One drawback is that the money becomes the kid's once they hit age 18. It's not a bad idea to diversify your assets among the different alternatives. And note that at this point, the law prevents a child from receiving contributions to both an Education IRA and Section 529 plan in the same year. |
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Be creative. Training your child to be a world-class athlete from the age of two is probably going overboard, but there's a plethora of scholarship, grant, and work-study programs out there that can help ease college costs. Books, Web sites like www.collegesavings.com, and consultants can help guide you through the thickets. |
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Start early. The longer your investing time frame, the more opportunity your money will have to compound and really take off. And getting an early start on all of the other college planning items you'll face can't hurt, either. |
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Think of yourself. As tempting as it may be, don't fund your child's education at the expense of your own retirement. Make sure to at least put aside money in your company retirement plan. If you own other assets in your own name, you can always help out your kids later on if the need is there. |
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