Valerie RumboughWhat is the best way to start saving for my child’s education?
You are already on the right track by making plans to save. Many parents, though, make the mistake of opening up an account in their child’s name. Although this will save tax dollars on the income earned on the account, once the child turns 18, all of the money belongs to him outright to spend as he wishes. In addition, having money in the child’s name reduces the amount of college financial aid he is eligible for.
Setting up a separate savings account in a parent’s name, or setting up a 529 plan or a Coverdell IRA are good ways to set the money aside. Once the account is set up, commit to making regular contributions to it that fit into your budget. Even if the amount is small, it will grow over time.
In addition to saving, you may also want to begin applying for scholarships in your child’s junior year in high school. There are many scholarships available, many of which are not used because students do not know about them. The key to receiving many of them is having good grades, so encourage your child to do well in this area.
Rumbough, CPA, CFP, is vice president of finance with the Baptist Foundation of South Carolina. For information concerning the above article or other matters, contact her at 800-723-7242.
*In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purposes.