Best Ideas to Begin Saving Money for College

 

There are many ways to save for college, this article will cover three ideas for tackling these future expenses.

Here are the three helpful ideas:

1. Get the future student involved. Set up a basic savings/investment account for the future student and have them take a portion of their gifts received an allowance, and/or earnings to fund the account. For example, if Sarah receives $20 for her birthday have her place $5 in her regular savings account, $5 in her college savings account, and then let her spend $10. As Sarah gets older, she will take a greater interest in how this money has grown. And, by having her more involved in the process, she will hopefully be more prudent in her selection of how to further her post-secondary education.

2. Utilize a 529 Plan. 529 plans are set up at the state level, but you do not need to be a resident of the state to participate in the plan. For example, if you live in Iowa, you can enroll in Virginia’s 529 plan if you feel it’s a better fit. A state’s 529 Plan may have certain income tax benefits for its participating residents – there is not a deduction for contributions on your federal taxes.

Here are some of the advantages of a 529 Plan:

Disadvantages:

3. Consider using a Roth IRA. Normally Roth IRA’s are used as a retirement vehicle, but you can also use it for a college savings plan. You must have “earned income” in order to contribute to a Roth IRA. There are no required minimum distributions (RMD’s) with Roth IRA so you can leave any excess money in the Roth IRA.

Here are some of the advantages of the Roth IRA:

Disadvantages:

A helpful tool for knowing how much to save would be the College Savings Calculator located at https://www.frontierbk.com/calc/CollegeSavings.html. Please give us a call at (844) 689-8844 if we can provide any additional assistance regarding your college planning needs.

Gary Popkes

Gary Popkes, CFP®
Senior Vice President
trust@frontierbk.com
605-332-3832

 

 

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