Other Savings Choices
Roth IRAs are more typically used for retirement savings, but you can dip into your Roth to pay for college without penalty–under certain circumstances.
In 2007, you can save $4,000 a year to a Roth, tax-free, and if you’re over age 50, you can put in an additional $1,000 “catch-up” contribution. In 2008 and thereafter, contribution limits will rise. Rosen feels Roths are a last resort for college funding.
Custodial accounts, which are investment accounts in your child’s name, became less desirable with recent tax law changes, so now more of your child’s assets are taxed at a higher tax rate. Jane S. from Philadelphia used a custodial account for her daughter, who is now graduating from college. “There was a little left over after the last tuition bill, so the rest is now in her name. I could have never done that in today’s economy.”
Save While You Shop
Register your credit cards with Upromise and your account gets funded each time you buy from a Upromise partner. The small amount of money you accumulate can be transferred to a 529 plan.
Penny Hastings, CA 11/14/08
If your teens have special talents...in music, drama, computer, science or sports...they have a greater chance of getting a scholarship to college. In all but the latter, scholarships are given by the college to reward past accomplishment and future potential, and to encourage a student with those skills to choose their college. With athletic scholarships (over $1.2 billion awarded in college sports scholarships each year!) they are awarded by the college, but through the athletic departments, mainly to recruit the best athletes possible for the college athletic program. In all cases, scholarships are the best of all financial aid options...they are free money and do not have to be repaid. Students with special talents should market themselves directly to the heads of the departments to indicate interest in their colleges. That will help start the recruiting process. Loans should only be considered after scholarship searches are exhausted.
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