Stashing Your Cash For College

It is estimated that college costs in the year 2020 will be close to a quarter of a million dollars. While it may invoke feelings of heart palpitations on the part of parents, starting to save now can be just the advise you need to follow.

There are several places where you can put cash into a college tuition fund for the future. The key to having enough when the time comes is to start as early as possible. However, it is never too late to start.

The most common and practical places to keep college cash is as follows:

529 Accounts
These accounts are state-sponsored investments that let you keep money aside for college. The money is tax deferred during the growth process and may even be deductible from your state tax returns. Families who have more than one child to educate also can use the option to move funds from one account to another. When researching 529 plans, it is important to look at the fees, performance information, and fund commissions as there can be dramatic differences.

Prepaid Tuition
There are some parents who can afford to pay now for what is to come. Prepaid tuition plans allow parents to pay the tuition of future college students at the prices they are today. There are different variations of plans and not all will allow for the same coverage, such as tuition with room and board.

Coverdell Education Savings Accounts
These accounts allow you to grow your money in a tax-deferred environment and continue to have money tax-free when used towards eligible education expenses. At the present time, contributions of up to $2000 a year are allowed. Congress is looking to change the accounts after 2010 and the annual contribution may then max out at $500.

Savings Bonds
US bonds that were purchased after the year 1989 can be cashed in tax free when the bonds are used to pay towards tuition and other college fees. For those in higher income brackets, the redemption is not tax free.

Regardless of where or how you begin investing or saving for college, again the key is getting a jump on things early. You can then contribute smaller, more manageable amounts over a longer period of time. Don’t forget to check out scholarship opportunities for qualified students as well as federal, state, and local grants. While college can be an enormous expense, especially for families with multiple children, it can also be managed efficiently and achievable over a longer period of time.