529s allow you to save more than any other type of college savings account. Contribution limits may vary by state, but you can save more than $300,000 per beneficiary in some plans. If your child doesn’t attend college, you can change the account beneficiary. “529s are the way to go, because of the high contribution limits and tax-free growth,” said Theresa Rosen, a CFP with Prudence Financial in Sudbury, Mass.
Herb Lazar of New Jersey, is using 529 plans as the main leg of his college savings strategy for his three children, ages 16, 10, and 5. “I have $100 per kid taken directly from my paycheck and put into a 529,” Lazar said.
Lazar also has custodial accounts and a Coverdell for his kids, but these accounts were opened before 529 plans became so popular.
Coverdell Education Savings Account
Coverdell Education Savings Accounts, formerly known as Education IRAs, offer tax-deferred growth, and you can invest your contributions in mutual funds or other investments within the Coverdell. Under current law, withdrawals for qualified education expenses are tax-free.
There are income limitations and contribution limits that make Coverdells less attractive than 529 plans. If you qualify, you may set aside $2,000 per year per child. And you can save in a Coverdell until the April 15 tax filing deadline just as you can in your IRA. Says Rosen, “Coverdells are good, but strictly limited in the amounts that you can save.”
Monica Matthews, Jeddo, MI 09/01/09
My husband I and never seemed to have the extra money to save for our kids college education. I was really worried when my son decided to attend a very expensive university. We worked hard in his senior year though and he won enough scholarships to cover his first year and much of the next 3 years of college tuition. If you work hard and help your teen apply for each and every scholarship they qualify for, you can win scholarships. Good luck to other parents out there! We got a lot of help from this website: http://www.how2winscholarships.com
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