Frugal Moms

I don’t usually cover specific savings strategies for specific saving goals, but given the specific tax benefits of saving for college, I think it would be fool hardy not to address it.  There are a couple very wonderful plans to save for college similar in design as a 401k that allow you to save and invest.  These are called 529 plans.  There are two types state 529 Plans and Independent 529 Plans.  For state 529 Plans the money saved and invested can only go to state colleges, however some states have added bonuses of matching contributions dollar for dollar or even two dollars for every one depending on your income.  Most cane be started with as little as 25 dollar provided you promise to put away 500 dollars with in two years or you set up and automatic payment from direct deposit.  State 529 Plans are an avenue to college that most working class parents can’t afford to ignore due to the dollar for dollar matching some grant based on income.  If you are interested in finding State 529 Plans go to Saving For College .

Independent 529 Plans areprimarily for private school tution.  Again a major investment tool that avoids tax issues  that would otherwise be cumbersome.  Private 529 Plans allow greater flexibility with where a student can go to college.  If you are interested in finding Independent 529 Plans for your state Go to Independent 529 Plan .

Another avenue that works similiar to an Independent 529 plan is US Savings Bonds .  When a US savings bond is bought by a parent with their child as the beneficiary and are cashed the same year the child goes to college, their income can be written off.  US Savings Bonds are a safer way to invest for a child’s future as opposed to investment accounts.  There is a 5000 USD limit to purchasing bonds each year, but you can have bonds automatically set up from your pay check similiar to direct deposit in their Treasury Direct Pay roll savings .  The catch here is that you don’t earn any interest on the money sent in via the program until you move the funds to a Savings Bond Online.

Trackback URI | Comments RSS