Start saving now! If
the Roes want to be able to help pay for college
without dipping into their savings or having
to refinance their properties, they will need
to start a disciplined savings plan immediately.
We have estimated that
a contribution of around $400 per month will
be needed to save the money that they need
for college. This will be a stretch in their
budget, but the Roes indicated that this is
a priority item and they will make the needed
effort to save this money. What we are looking
for is a simple, effective way to save these
funds.
Pick right savings vehicle
Now that they know the amount, they need to
pick the appropriate vehicle. For their purposes
they can choose between amassing personal
assets, a Coverdell education savings account,
U.S. savings bonds or a 529 plan. While Coverdells
are good, the contribution is limited to $2,000
per year per student -- not quite enough to
reach their goal. They could combine this
with an investment in U.S. savings bonds,
whose earnings are federally tax-free if used
to pay for higher education. Or they could
put the money in a 529 plan.
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