Stop Guessing About College Costs And Start Saving Smarter With These Plans

College can be seriously expensive and it’s definitely a good idea to start saving as soon as you can. Right now an out-of-state public four year course costs an average of $23,000 per year in tuition and fees. Work out how much you might need, and research for the right savings plan to help you save it. There are many plans with different benefits designed to help families save up for college.

529 plan

A 529 plan is a savings plan just for education. It’s named after Section 529 of the Internal Revenue Code. It doesn’t matter if you save and go to college in different places, the benefits are just the same. Earnings are federal tax-free, and won’t be taxed when the saved money is used. Many states offer tax breaks for these kind of savings as well – if yours doesn’t then you can choose a plan in another state. With these kind of plans, the child is the beneficiary only – so no spending on cars instead of education! There’s no income, age or annual contribution limits. It’s also possible to set up automatic investments, making the saving easy.

Coverdell Education Savings Accounts or ESAs

Formerly known as Educational IRAs, these accounts allow for tax-deferred growth also. The account stays with the adult only until the child reaches age of majority. The investment options are limitless, but the annual contributions are restricted to around $2,000 per beneficiary, per year. These plans can be used for some other forms of education, so if you think college might not be the end goal after all, these kind of plans could suit you.

Online tool and calculators

There are lots of savings accounts out there, and lots of tools to help you understand them too. Make sure you do your calculations to ensure the college saving plan you choose is the right one.