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Saving for your kids

It is difficult to start thinking about your child's future college education, especially if she hasn't even started kindergarten. It is even more difficult to start saving money now to help pay for future college costs.

But even if you started saving only a few dollars each week or month now, this can grow into a decent college fund by the time your child graduates from high school. You are making an investment for your child's future. Hopefully, the more money you save now will mean less money you'll need to borrow later on.

It's true that college tuition costs go up every year. But as a parent, you most likely won't be paying for the entire amount of what college costs. There is financial aid, such as grants, scholarships and federal loans that can help pay for college. These financial aid programs, along with the money you have been saving can make college affordable for everyone.

529 Plans

The 529 is the most popular kind of college saving plan. Every state sponsors its own 529 where your money can grow free of federal taxes. And in many states, it’s free from state income tax too. Every state has its own college savings plans. You don’t have to get a plan in your own state, so shop around and find one that fits.

What you can expect:

  • You can open a special savings account for yourself or your child (or anyone else, whether they’re family or not).
  • You won’t pay federal taxes on the money you save, as long as you use it for education purposes.
  • Anyone can add money to your account.
  • You can still take out your money, even if your child gets a scholarship and doesn’t need the money from your 529 plan.
  • You can start this kind of account with any income.

Eligibility

There are very few restrictions on 529 Plans. No matter how much money you earn or how many kids you have, you can always sign up for a 529. There are penalty fees and tax problems if you don't use the funds for college. You’ll have to pay a 10% penalty and income taxes, based on the money you earned.

Choosing the right 529 for you

  1. Look at your state’s plan. Check for tax breaks and matched savings grants.
  2. Find out about fees. How much does it cost to open an account or maintain it?
  3. Are there minimum or maximum contributions? Make sure your plan will allow you to reach your savings goal by the time you’re ready to pay for college.

  4. Make sure your money will be managed well. You want your money to be in good hands. Do the research and make sure the manager of your 529 has a good reputation.
For more information on other college savings options go to The Beehive college savings section . (This will open The Beehive website in a new browser window).