Saving For Kids college education

My daughter will be turning 2 January. For my wife and I, it's time for us to begin planning for her college. Are we going for a college 529 plan, an education IRA or a normal investment account? What should we do?

So I started with the examination of the different college savings options available.I decided to go to the website of Vanguard is the most conservative Vanguard mutual fund company that I know, because saving for College is as far as I dont want to invest too aggressive. so here is what I found.


529 College savings plan

529 plans can you invest in higher education of federal and state income taxes. sometimes States or schools can sponsor a 529 plan. most of which are open to citizens of all Member States. Some plans may you between $ 200,000 and $ 300,000 to invest for a child, so a 529 plan can be your best bet for the full financing of a college education.


Advantage

Enjoy the flexibility, high contribution limits and tax incentives to save for College and graduate school to invest.

Disadvantage

The money can only be used for College.
And if your child is not going to school, you can select another eligible family member as beneficiary of the account name and to use 529 assets to pay for the training of that person if no eligible family members can be referred to as beneficiary, you may have to close the account, pay federal taxes and, where appropriate, State and federal criminal tax 10% on the profit not used for qualified higher education expenses.

Education savings account

Advantage

You can control to any level of a child's education--elementary school, high school, College, or invest., and you can start from the birth of the child to invest. the money is taxed on the tax rate of the child, which is usually lower than the parents.
Although contributions not deductible for tax purposes, your earnings grow tax free and withdrawals are free from federal income tax for qualified education expenses.

Disadvantage

You can only change the contributions of $ 2000 per year.

UGMA/UTMA accounts

Advantage

A fiscal advantage way to save for the future of higher education of a child or any other purpose that the benefits of the child.
The accounts dont have contribution limits, but contributions over a certain amount will lead to the Federal gift tax.

Disadvantage

When the child is 18, he/she more control of the money and they can be anything to do with the money.

Regular investment account

Advantage

You retain full control of the account. selecting an extensive lineup of stocks, bonds, balanced, and short-term investments.

Disadvantage

You will not receive any tax advantages of accounts specifically created for the University to invest.

So what did we decided?

Now, our finances are in order with no credit card debt a we regularly keep a close eye on our savings and expenditure. so we went for a regular investment account. We chose the vanguard STAR Fund, which is that a conservative, balanced mutual funds that consistently offers a yield of at least 10%.

Tushar Mathur:
Author of http://www.everythingfinanceblog.com
Email: tusharm@gmail.com