College Savings Accounts

Almost every parent dreams of his or her child going to college one day. For this reason people often begin planning for college the day their child is born. There are a number of different ways in which a person may save money for their child’s college education. There are conventional savings accounts that have been set up specifically for college funds and then there are other ways in which eager parents can put aside money for their children’s academic future. Some of the following methods of saving money for college are among the most popular and seem to be the most successful.

A 529 Plan
Most states have what is called a 529 plan in place to assist families in saving money for their kids to go to college. In some cases there are even 529 plans that are offered by specific educational institutions. The reason these plans are called 529 plans is because they are named for Section 529 of the IRS code which designed these types of savings plans back in the year 1996. The good thing about a 529 plan is that the state you live in and hold the 529 plan in does not typically affect the college your child chooses to attend. For example, if you have a 529 plan in Florida but your child is accepted to a college in New Mexico, the 529 would still be valid when used in that state, provided the educational facility is considered eligible under the guidelines of the 529.

High Interest Bearing CD
Some families opt to purchase high interest bearing CDs with a maturity date close to that of the time their child/children will be ready for college. There are many different types of CDs that can be purchased at a number of different interest rates. Most financial institutions have specific CDs they have designed for college funds in mind. In order to determine the best type of CD to purchase in order to save money for a child’s college fund then the best thing for a person to do is go to his/her local branch and ask one of the representatives what he or she would suggest.

Early Withdrawal from IRA for College
Most of the time when people hear the term IRA they automatically think about savings for retirement. This is of course because an IRA is actually an Individual Retirement Account. However, what most people do not know is that they can also be used to fund education. Unfortunately many IRA accounts have an early withdrawal penalty imposed if the plan is cashed in or borrowed against before the account holder reaches 59 1/2, but this is a small price to pay when balanced against a college education. Some IRA accounts contain a loophole that many people are unaware of as it is usually written in the fine print. In addition, a child’s education is not the only reason early withdrawal from an IRA can occur. Just be aware of the fact that the IRA may not penalize the account holder but the federal government may impose income tax on any capital gains.

No matter what method of savings a parent opts for, the most important thing is that he or she finds some way to accrue enough money for the child to attend college. There is nothing more important in the life of a young person than obtaining a good education that will enable him or her to achieve a higher level of success in life and of course the financial stability provided by a solid academic background.

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