Dear Estelle. There’s never enough time or money to adequately prepare for our children’s college education. Although they are just in elementary school we are already feeling the pressures of “doing the right thing” for them without having to scrimp with each paycheck. How can we manage to put aside funds for their future without living like paupers? LSJ, Littleton
Strategies I recommend for saving for college include downsizing the gifts that you typically give for birthdays and holidays. High tech toys and fashions are expensive and short-lived. Try substituting less expensive gifts and use the extra money to invest in college funds that have long-term growth potential and will provide wonderful opportunities for your children’s education. Encourage the grandparents to participate too.
A 529 College Savings Plan is one of the most advantageous ways to save for college. It’s easy to open, flexible, loaded with benefits, and easy on any budget. Accounts can be opened for as little as $25. Twenty-five dollars a month per child is the minimum amount needed to open a 529 account. A 529 is versatile, allowing your child to pay for tuition, some room and board, fees and books. The funds can be used nationally at any public or private college, community college, or technical school.
Aside from the obvious benefits to investing in your children’s future, there are also some substantial tax benefits.
- Earnings grow tax-free. Withdrawals are tax-free also as long as funds are spent on qualified higher education expenses.
- Colorado residents receive dollar for dollar state tax deductions on deposits to 529.
- There are some significant estate planning benefits to 529s. Deposits to a 529 reduce the taxable estate of the contributor, a grandparent, for instance, while allowing the contributor to maintain control of the fund. Federal gift tax provisions allow large contributions to a 529 without incurring gift taxes.
College Invest is the not for profit division of the Colorado Department of Higher Education. Its primary goal is to enable students to receive an education beyond high school. If you are looking for help paying for college, go to their website for lots of important information. www.collegeinvest.org .
Remember, it’s never too early to start saving for your children’s education.