Savings Options

Building a savings account is very hard because you can’t predict what tomorrow will bring. We should save a lot of money, but we don’t know how much should be. So the best way is to search for ways or plans helping us to save as much money as possible to secure our children life.

That’s why you need to start saving now. The sooner you start saving, the better. All you have to do is to give your savings account enough time to grow.

There are many options available helping us to find the best plan that is working for us. You have now a number of tax-advantaged federal and state college-savings vehicles as illustrated below:

First – 529 Plans:

These plans offer two types to choose what’s suitable for you, the prepaid tuition plan and the savings plan. The both are guaranteed ways to pay for your children’s tuition fees as they offer generous tax breaks, provided you use the money for qualified expenses.

The difference between them is that most pre-paid plans require the account owner (you) or the beneficiary (your child) must be a resident of the state in which the plan is offered. The 529 college savings plan is far more flexible than the pre-paid tuition schemes, and perhaps safer.

Second – Coverdell IRAs:

It’s also known as Coverdell Education Savings Account (ESA) or Education IRA. Coverdell IRAs are accounts created as an incentive to help parents and students save for education expenses.

Through these plans, you cannot contribute more than $2,000 a year and withdrawals are tax-free, no matter how many accounts have been established. The beneficiary here must be under age 18.

Third: Other College Savings:

However a 529 plan is a great way to save for college, but it’s not the only way. There are many options out there such as:

- U.S. savings bonds: They’re very easy to purchase, and available in two types, Series EE (it may also be called Patriot bonds) and Series I bonds.

- Mutual funds: This plan has many advantages than 529 plans as it were used widely for college savings.

- Custodial accounts: These accounts based on holding assets in your child’s name. A custodian will manage the account and invest the money for your child.

- Trusts: You can set up an irrevocable trust or a 2503 trust to hold assets for your child’s future education.

The cost of college continues to soar; we should get prepared for that.

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