College Plans
Are you concerned about your child's higher studies?
Do you always worry that you wouldnt be able to afford your child's college?
In that case, you can kiss away all your worries because now you have the option of various savings plans. You can opt for the one that suits you best and gives you maximum benefits. Among all these savings plans, the most popular one is 529 savings plans which is a state sponsored plan.
Another plan is the Coverdell educational savings account.
In Coverdell savings plans, parents can invest after-tax money into an account to save for college. A unique feature of this savings plans is that the invested money can also be used to get education from private school. The interest on the money invested is tax-free if you withdraw the money for qualified educational purposes only. But the negative aspect of this plan is that the total investment cannot exceed $2000 and moreover, the beneficiary i.e. the child, is the owner of the account. This means that if the funds are not used for education purposes, then they will be given to the child and not back to you. This drawback of this plan is that it gives the child the freedom to use your hard-earned money in whichever way and you cant do anything about it. 529 savings plan is a state sponsored plan that helps you to save your income tax on the money invested. The money within the investment be it principal or the interest- is income-tax free on the condition that you withdraw the money only for educational purposes. The states set up their plans with their chosen asset management companies and you open up your account with these companies. The total investment can reach $200,000. The best thing about 529 plan is that the entire control of the account is in the hands of the parent or the guardian. This gives you the added benefit of transferring the money to any other family member in case your proposed beneficiary doesnt want to get higher education. The money invested in such savings plans can be used to afford additional educational expenses too such as books, boarding, food etc. Thus, by investing in one of these savings plans you can be sure that at any point of time you would be able to afford the college expenses of your child.
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