Financial Planning

College Savings Plans
Next to your home, a college education is one of the largest purchases your family will make. While saving for it now may seem impossible under the demands of your current budget, having even a portion of the needed funds set aside will help tremendously when your children reach college age.

 

Variables that will affect your plan
Your ultimate plan will depend on a variety of factors including:

• The number of years until college begins
• The amount of money available to invest
• Your family’s income tax bracket
• Your tolerance for risk
• Your investment experience

 

Approaches to saving
Some of the more traditional savings vehicles used may include savings accounts, tax-free municipal bonds, U.S. Treasury bills or bonds, or, for the longer-term investor, growth stocks or mutual funds. There are also a number of strategies that provide tax advantages, such as 529 college savings plans, Education IRAs, savings bonds, baccalaureate bonds (a special form of tax-exempt municipal bond) and qualified state tuition plans.

 

Understanding important issues
One of the questions that may arise is “Who owns the funds—the parents or the child?” This is much more than a control issue because it involves income and gift tax issues that could impact your child’s future ability to receive financial aid. Because of these and other tax issues, it is extremely important that you seek professional financial planning or tax advice before implementing a plan.