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College Planning — Part IX
Looking at a brand new baby hardly inspires thoughts of universities. But despite the endless sea of new demands that now require your attention – and financial resources – there is almost none more important than starting to save for your child’s college education.
Tuition for a four-year program, including room and board, at a public university costs on the average between $20,000 and $50,000. The same bill at a top-tier private university can run you as much as $100,000 to $150,000. What’s more, college tuition costs are expected to rise on the average of 4 to 7% per year. There are several different ways to help fund your child’s education. We’ll give you the long-term basics here, but for a complete course on financing education visit our
If you already have savings for education, you can put that money to work for you today using a variety of investment vehicles like stocks, mutual funds and bonds.
Education IRAs are another popular option. These are available for people who have an adjusted gross income (AGI) beneath a set limit.
- The income limits phase out between $150,000 and $160,000 for couples and $95,000 to $110,000 for singles.
- You can use the accounts to pay for college expenses of any family member. If you don’t use the funds for educational purposes, you will owe income tax on the amount withdrawn and be hit with a 10% penalty. The beneficiary of the funds must be under age 18 when it is initially set up.
- The contribution is not tax-deductible, but earnings grow tax-free and are taxed at the child’s rate when withdrawn. The accounts can also be rolled over to another family member if not used by age 30.
HerTip: When the time comes for you child to head off to school and you still need assistance with funding, there are plenty of college and commercial loans, government sponsored programs and private grants and scholarships available to you. Our college planning center has more information on all of these and other options.
Conclusion
Having a new baby is a special time — a time for taking time out for you and your family and for welcoming your new arrival into your lives. Having your finances in order will help ease the transition to parenthood and give you the peace of mind you need to focus on what matters most. Congratulations and good luck.