When you are getting ready to have a child, there are many things you need to consider. There are many things you have to buy, rooms to redecorate, and everything else in between. Saving for college may not be at the top of your list. That’s very understandable, but just as with saving for retirement, the earlier you start, the better off you’ll be. So, if you have the intention of helping your child (or grandchild) pay for college, deciding your plan of attack early is the best way to go.

However, since there are a number of options for the types of accounts you can use for saving for education, which one would be right in your situation? For the next month, we’ll be doing a series where we discuss the both the positive and negative aspects of some different savings vehicles for college: 529 plans, Coverdell Education Savings Accounts, Roth IRAs, and UGMA/UTMA (Uniform Gifts to Minors Act/Uniform Transfers to Minors Act). Which type of account is right for you depends on your individual situation, so hopefully discussing each in depth will help you decide. Once you make the decision on the type of account, it will be one last thing you need to think about!

Also, saving for education doesn’t need to be only for children. If you plan on returning to school, saving for that education is something that you need to start considering!

Begin thinking about the following. You will need to decide on the answers to the following questions to be able to decide which type of account would work best in your situation.

  • Who is the account for? Your child, grandchild, yourself, or someone else?
  • How old is the potential student you want to save for? Or in other words, how much time is there until the savings will be used?
  • What kind of school will the student be attending? Is it accredited? Is it public or private? A junior college or a 4 year institution?
  • Do you plan on saving enough to cover the entire cost of the education (tuition, books, room & board)? Or do you plan on paying only for tuition? Do you plan on relying on financial aide?

Next week we’ll start with 529 plans. Have your answers in mind to the above questions!

 

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