The Best College-Savings Tool

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>> If you trying to stash some cash away for your child's college education you should open a 529 savings plan. These plans are offered directly by states and were created specifically to help parents save for higher education. Now like an IRA your savings are directed to mutual funds or other similar investments. Here's the best thing about these plans. If you use the savings for college related expenses you'll never pay taxes on the earnings and some states even offer additional tax breaks to residents who invest in a 529 but the benefits don't stop there. Anyone can open a 529. There are no income limits and once it's open anyone like grandparents for instance can contribute to that account. Though the child is the beneficiary parents maintain control of the money. They get to decide how it's spent. If your child winds up not going to college you can transfer the account to another family member and students of any age can use a 529. This means if you or your spouse decides to go back to school you can pay for it with your 529 savings. Choosing a 529 that makes sense for you can be daunting there are over 80 plans out there so here are 3 important things to keep in mind. Check first to see if your own state offers a plan and what state specific tax breaks are available. Look for a plan that offers a wide range on investment funds with above average performance. This will allow you to gradually become more conservative with your money as your child approaches college age and still beat the cost of college inflation. Finally, select a plan with low fees. You'll do best with something called a direct sold plan and vs. a broker sold plan. Now all things being equal if you chose a plan with lower fees you'll wind up with more money for college expenses then it's up to your child to really make your savings pay off.

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