I heard there are two different types, and one type is better. It has something to do with taxes. Obviously, I want my money to accumulate the fastest with the most freedom for my baby boy. I live in Illinois.
2007-12-18 13:50:37 · 9 answers · asked by Anonymous in Business & Finance ➔ Personal Finance
Another option is an ESA - education savings account also called the education IRA. There are income limits (I believe you have to make less than $110,000 single or 220 jointly) and you can only put in $2,000 per tax year per child. It's supposed to have a low impact on financial aid b/c the account remains an asset of the parent. If you make too much money the 529 is a great option as well. I don't know as much about that since we're doing an ESA for our daughter. But some people also do both.
2007-12-19 03:20:46 · answer #1 · answered by wckc2002 6 · 0⤊ 0⤋
Non, if you really take a good look you will find that the tax advantage is not there unless the grandparents pay for it. Your child will be penalized via tax and loss of loans, grands etc. You are better off to put extra funds in your own Roth IRA or max out your own retirement contribution. Do your homework, most institution will not tell you that the tax benefits stop around 2010 I believe. For young children as you own they don't make sense.
2007-12-18 14:00:23 · answer #2 · answered by Iris R 5 · 0⤊ 0⤋
I personally am not a fan of any of the college savings plans. None of them are very flexible. Do you have an IRA? I have a ROTH that I fund toward retirement and I also plan to use it for my children's education. The funds can be withdrawn for such purposes as education for children or to buy a house without penalty. In my opinion, this is the best route to go in most cases. That way, if you kids don't go to college (God forbid), you still have the money in the account for retirement. Many of the college savings plans you are thinking about will penalize you if the money is not used for college. What will you do then if you kids choose not to go to school?
2007-12-18 15:54:24 · answer #3 · answered by Chris G 2 · 0⤊ 0⤋
A state-run 529 plan is your best option. Tax free when used for college or tech schools, you can pick from a number of different avenues to invest. In Ohio, we have Vanguard and Putnam to pick from and the fees are dirt cheap. Especially Vanguard. I'm sure Ill. has 529's available. And you can set the plan up yourself, it's not hard at all.
Also, my wife and I have charge cards from Barclay's Bank called Futuretrust where the "rewards" go right into 529's!! Look 'em up, you will be glad you did.
2007-12-18 13:59:57 · answer #4 · answered by charlie m 4 · 0⤊ 0⤋
Some of the other post are correct, you'll want to get a 529 plan. You will get tax credits for doing this too. Thats great you are thinking of your childs education so early. Best of luck and happy holidays
2007-12-19 03:39:23 · answer #5 · answered by jt6341 3 · 0⤊ 0⤋
College Illinois might be a good option because it'll lock in today's tuition rates. The benefits are good at most schools in the U.S.
http://www.collegeillinois.com/en/
2007-12-19 10:02:14 · answer #6 · answered by Lea 7 · 0⤊ 0⤋
There is one with more freedom to take money out, but it is taxable. The one with less freedom to take money out when you need is not taxed, I believe.
And through the mathematical power of compounding, the non tax-able accumulates faster.
2007-12-18 13:54:14 · answer #7 · answered by Moo 5 · 0⤊ 0⤋
US savings bonds, series E,,, You can use them for anything penalty free. If you use it for college expenses the interest is tax free. They are also guaranteed. They dont pay a ton of interest but for a 1 year old you dont need alot if you start now. Doing the college tuition payments now may screw you if your kid doesnt go to college.
2007-12-18 14:20:17 · answer #8 · answered by sfcjoe4d 3 · 0⤊ 1⤋
529 plan
https://www.brightstartsavings.com/
2007-12-18 13:55:27 · answer #9 · answered by Anonymous · 0⤊ 0⤋