COLLEGE SAVINGS 101

Savingforcollege.com

How college savings can make a great gift
http://www.savingforcollege.com/articles/how-college-savings-can-make-a-great-gift-655

Posted: 2014-08-01

by Kathryn Flynn

Parents and grandparents of young children often struggle to come up with meaningful birthday and holiday gifts. You find yourself cringing at the thought of another expensive doll or stuffed animal getting lost in the bottom of the toy box. One gift idea that has been gaining popularity is to write a letter to the child each year on or around their birthday telling them how much they are loved and why. Ideally, the letters would be given to the child when they graduate from high school and are about to leave home for college. One variation we’ve seen is to include a small amount money in the envelope with the letter each year. That’s a great idea, but instead of having cash sit in an envelope (tempting you to "borrow" from it), wouldn’t it be better to put the money somewhere it can grow?

Top 7 Benefits of 529 College Savings Plans

How about making a contribution to a 529 plan for the child each year when you write the letter? If you have a new baby, an annual deposit of just $150 will grow to a gift of $4,914 in 18 years when its time for college. How’s that? A 529 college savings plan is an investment account that works similar to a retirement plan like an IRA. Your money earns interest that compounds over time – meaning it earns interest on top of interest. What’s more, earnings in a 529 plan are not subject to federal taxes, and are not taxed when you make a withdrawal as long as you spend the money on qualified education expenses. Some states also offer additional tax incentives for residents.

Calculate How Much You Need to Save For College

If you’re worried about losing the “wow” factor you may get from an envelope full of cash, how about including the amount of each deposit with the letter and the balance of the account on that date? The child will see the growth of the account over time and learn a valuable lesson on saving and investing money. To make sure the money is spent wisely when the time comes, it’s also a good idea to start thinking about college as soon as you begin making contributions to the college fund. To stay on top of it, include some time for research when you write your annual letter. When your child is young, it might be as simple as coming up with a few ideas for activities they can get involved in to develop their interests. As they begin high school, you’ll want to make sure they are working toward building a stand out scholarship resume that includes a good combination of extracurricular activities and volunteer work.

Planning For College at Every State of Life

Parents and grandparents of young children often struggle to come up with meaningful birthday and holiday gifts. You find yourself cringing at the thought of another expensive doll or stuffed animal getting lost in the bottom of the toy box. One gift idea that has been gaining popularity is to write a letter to the child each year on or around their birthday telling them how much they are loved and why. Ideally, the letters would be given to the child when they graduate from high school and are about to leave home for college. One variation we’ve seen is to include a small amount money in the envelope with the letter each year. That’s a great idea, but instead of having cash sit in an envelope (tempting you to "borrow" from it), wouldn’t it be better to put the money somewhere it can grow?

Top 7 Benefits of 529 College Savings Plans

How about making a contribution to a 529 plan for the child each year when you write the letter? If you have a new baby, an annual deposit of just $150 will grow to a gift of $4,914 in 18 years when its time for college. How’s that? A 529 college savings plan is an investment account that works similar to a retirement plan like an IRA. Your money earns interest that compounds over time – meaning it earns interest on top of interest. What’s more, earnings in a 529 plan are not subject to federal taxes, and are not taxed when you make a withdrawal as long as you spend the money on qualified education expenses. Some states also offer additional tax incentives for residents.

Calculate How Much You Need to Save For College

If you’re worried about losing the “wow” factor you may get from an envelope full of cash, how about including the amount of each deposit with the letter and the balance of the account on that date? The child will see the growth of the account over time and learn a valuable lesson on saving and investing money. To make sure the money is spent wisely when the time comes, it’s also a good idea to start thinking about college as soon as you begin making contributions to the college fund. To stay on top of it, include some time for research when you write your annual letter. When your child is young, it might be as simple as coming up with a few ideas for activities they can get involved in to develop their interests. As they begin high school, you’ll want to make sure they are working toward building a stand out scholarship resume that includes a good combination of extracurricular activities and volunteer work.

Planning For College at Every State of Life

 

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