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herlife | financeTIPSforAVINGfor Kids’Collegeby catie watson56 HERLIFEMAGAZINE.COMIf you’re a parent, it’s never too soon to think about financing yourchild’s college education. A few decades ago it was possible for acollege student to pay for his or her own education with a part-timejob and a small amount of financial aid. With today’s inflation and therising cost of higher education, this has become nearly impossible.According to the College Board, the average cost for tuition and fees atfour-year colleges and universities has increased by nearly 51 percentover the past decade (when adjusted for inflation). These costs are guaranteedto continue to rise.If you’re concerned about how you’ll pay for college for yourkids, it’s never too early to begin saving. By starting early and savingregularly, it’s possible to provide your children with a substantial sumfor college. For example, investing $100 per month with an 8 percentreturn will yield $48,000 after 18 years.Your first step in saving for your kids’ college education shouldbe setting up a 529 account. The term 529 is used to refer to atax-advantage investment plan that has your child as the designatedbeneficiary. These plans, which are named for Section 529 of the IRStax code, are administered by state agencies and non-profit organizations.All income from a 529 plan is free from federal income tax aslong as it’s used for qualified college education expenses. Some statesalso waive taxes on 529 returns or allow deductions for contributions.Besides the tax savings, one of the greatest advantages of these plans isthat there’s less temptation to divert your college fund when it’s safelytucked away in a 529.There are a few things to be aware of when it comes to 529 plans.If your child doesn’t go to college or if money is withdrawn for noneducationalexpenses, your investment will be subject to penalties andtaxes. Also, since 529 plan managers invest in stocks and bonds, thereis some risk. Your returns can fluctuate or perform poorly dependingon economic conditions. Despite these caveats, 529 plans are highlyrecommended by investment experts for financing a child’s collegeeducation. The easiest way to contribute on a regular basis is throughautomatic payroll deductions.Don’t be shy about enlisting the helpof others when it comes to savingfor college. As soon as your childrenare born, let family and friends knowthat contributions to their collegefunds will be appreciated.According to financial experts, you should never prioritize yourkids’ college education over saving for your retirement. Long beforeyour oldest child is ready for college, crunch the numbers and figurehow much you will need for retirement. Once you know how much tosave each year to reach your retirement goals, you can create a collegesavings plan. In the long run, you will be doing your children a favorby ensuring that you will be able to cover your own expenses in yoursenior years.Continued on page 58