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Saving for College: An Overview of the Smartest Strategies to Invest in a College ...

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  • Saving for College: An Overview of the Smartest Strategies to Invest in a College ...

    Saving for College: An Overview of the Smartest Strategies to Invest in a College Education


    College tuition has increased by 35 percent since 2001, bringing the average in-state tuition (including room and board) for a four-year public university to $12,800 a year, according to the College Board. Opt to send your child to a four-year private school and the tuition jumps to $30,400. Need books, transportation and other inevitable personal items? Add on another $3,000 to $4,000 a year, the College Board estimates.

    Clearly, the task of saving money for your child s college tuition is daunting, but don t panic. There are a number of strategies you can use to make sure you re investing in your child s education, without going broke yourself.

    529 Savings Plans

    A 529 savings plan allows parents to invest money into the account while earnings accumulate tax-free. Further, withdrawals are also tax-free when they re made for the purpose of funding college expenses such as tuition, books and room and board. Plus, anyone, including friends and other relatives, can contribute to the account.

    What to watch out for: There is at least a 10 percent penalty charged if funds are withdrawn for non-education purposes. There are also varying fees involved with many of these plans, and in certain circumstances the plan may reduce the amount of financial aid the student qualifies for.

    529 Prepaid Tuition Plans


    More than 12 states offer prepaid tuition plans, which allow parents to purchase units of tuition for in-state colleges or universities at today s price, for use at any time in the future.

    What to watch out for: While students can apply prepaid tuition money to an out-of-state or private school, additional tuition costs will apply. Further, prepaid tuition plans are viewed as a resource and, as such, will decrease the amount of financial aid your child qualifies for dollar-for-dollar (as though they had received a scholarship).
    Coverdell Education Savings Accounts (Formerly Known as Education IRAs)

    Parents can contribute up to $2,000 a year to a Coverdell account, in which the earnings grow tax-free, and funds can be withdrawn tax-free as long as they re being used for education expenses.

    What to watch out for: Contributions are not tax-deductible, and a fee is charged is they exceed $2,000 a year. There are also income limits for contributers and, if the money is not used for education purposes, the child must withdraw the money within 30 days of his or her 30th birthday (taxes and a penalty are then due). However, the account can be rolled over, without penalty, to another family member under the age of 30.

    College is Next Year, and We Haven t Saved Now What?!


    If you haven t saved much, or any, for the kids college educations, and senior year in high school is fast approaching, don t panic. There s still time to get your kids off to a great educational start.

    First and foremost, take the step of overcoming any emotional blocks and barriers that may be preventing you from proper money management. The scientifically proven Sedona Method is an easy-to-learn, do-it-yourself system that will show you how to do this by letting go of any negative thought or feeling that s holding you back from being your best financially.

    The Sedona Method helps you to easily break the patterns of thought and behavior that cause your self-sabotage, in this case not handling money matters properly, to reoccur and prevent you from having what you want -- including financial security for yourself and your family.

    After you ve freed yourself emotionally, you re ready to start planning, and fast, with these tips from expert financial advisors:
    • Decrease your expected family contribution (EFC). This is the amount, based on your previous year s earnings, that financial aid sources will use to determine how much financial aid your child will receive. The greater it is, the less financial aid your child will qualify for. (A professional financial planner can help you figure out how to do this).
    • Attend a community college first. This is an excellent way for your child to take classes for less money, then after a couple of years transfer those credits to a more prestigious (and more expensive) school to graduate.
    • Consider a tuition-free school. Yes, there is such a thing. However, students are usually required to work 10 or 15 hours a week on campus. Some tuition-free colleges include The Cooper Union (New York, N.Y., Webb Institute (Glen Cove, N.Y.), Berea College (Berea, Ky.), College of the Ozarks (Point Lookout, Mo.), and Alice Lloyd College (Pippa Passes, Ky.).


    Be on the lookout for scholarships. They re available from a wide variety of sources, and your child will likely qualify for many of them. Check out your own employer (some offer education money for employeeskids), have a meeting with your child and his or her high school counselor, and visit the local library and the Internet to find scholarship opportunities that are available.
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