Many experts recommend saving for retirement oversaving for college, as writerRuth Davis Konigsberg from Time Moneyexplains.
Ideally, you should save for retirementandyour childrens college education simultaneously.
The best-known way to save for college is througha 529 plan.
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My husband and I opened a 529 plan for our daughter soon after she was born.
Rather than wondering and procrastinating, I decided to find out for myself.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
Ask one of these companies to help… That means youll have to pay taxes on that money and a 10% penalty.
Did you know?
Here are a few other options to save for your childs education.
Savings Bonds
You probably remember savings bondsas something boring your grandparents gave youfor your birthday.
But what does that mean, exactly?
Series I savings bondsare low-risk and earn interest during the time you own them.
The interest rate on a Series I bond is currently 2.58%,according to Treasury Direct.
Series EE bonds have a lower interest rate of 0.1%.
They earn a fixed rate of return based on the date of purchase.
After that, the IRS will tax the money at the parents rate.
The main benefit of a custodial account isyou can invest your money wherever you like.
In contrast, a 529 account tends to dictate your options, which can be limiting.
Like all investments, your success here may vary with the amount you invest and what you invest in.
Custodial accounts share one drawback with 529 plans.
Additionally, custodial accounts must be turned over to the child on their 18th birthday.
Unlike a 529 plan, there are no penalties for spending this money on anything other than education.
She enjoys running, eating, beer and puns.
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