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Financial Literacy - College funding
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Make it a family affair
Parents aren't the only ones who should be concerned with paying for college. Get prospective students to share the load.
Smart ways to pay for college

Make saving a family affair

College savings doesn't have to weigh on the shoulders of parents alone. Opening an account in a 529 plan provides a way for relatives and friends to contribute to a tax-advantaged investment.

"The beauty of the 529 plan is it allows everyone to get involved," says Tim Wyman, CFP, estate planning attorney and partner with the Center for Financial Planning, in Southfield, Mich.

The trick is getting family and friends to help your child's savings grow by making contributions to a 529 account. Here are some creative ways to get loved ones in on the college savings game.

Save for college
Spread the college savings responsibility among family and friends by following these tips:
Make college saving a family affair
1. Get help from relatives.
2. Tap your kids.
3. Make savings automatic.

Getting help from the family
For birthdays and holidays, children often receive gifts or money from relatives. Instead of the usual toys, loved ones could really do some good by making all or part of the gift a contribution to a 529 account. "Kids don't need another cute scratchy outfit," says Neale S. Godfrey, chairman of the Children's Financial Network.

Most 529 plans allow direct, third-party contributions to the account. If not, loved ones can always give money to the parents, for them to put in the account. Check the rules of your 529 plan to see what the procedure is for external contributions.

That doesn't mean you have to demand money from family members. "Let them know you have this great plan and that college is on your mind. That will put people on notice," says Wyman. He says it's easy if a relative has been giving the child money already -- just have that person make a contribution to the 529 plan instead.

Beyond birthdays and holidays, generous family members and friends can help college-bound relatives by sending checks, saving through payroll deductions or sending electronic bank transfers. They can contribute up to $12,000 per year without triggering a gift-tax liability. Family members can frontload up to $60,000 in one year per beneficiary and then spread the exclusion over five years to avoid the gift tax.

-- Posted: Sept. 17, 2007
 
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