Preparing for college could be a daunting task. And considering the cost of it all could be simply overwhelming. According to the College Board, the average cost of attending an in state public college, including room and board for the 2014-2015 year is $18,943 and the number more than doubles for a private university averaging as much as $42,419!
If you were fortunate, your parents wrote a big healthy check toward your college expenses and provided you with sound advice during your time in college. However, if you were not so lucky, you may have been dropped off to college with only sound advice! And we all know, sound advice doesn’t pay for college!
But know, you can change the cycle. Whether you are a parent, expecting or just merely dreaming of your future offspring, it is no greater time than now to begin investing in your children’s future. There are many steps you can take toward saving for your children’s education. Now more than ever, it is important to take advantage of tax-advantaged accounts that may be available to you. Consider these education saving vehicles:
Section 529 Plan
A section 529 plan allows earnings to grow tax deferred and distributions for the purpose of paying education are tax-free. States and eligible institutions provide 529 plans. A 529 plan could be either a prepaid or a contribution plan.
The key advantages of the 529 plan, the earnings grow tax-free and the contributor may be eligible for a state deduction. Also, say for instance, Junior decides to follow his dreams and become an NBA player, all isn’t lost! You can request to change the beneficiary to another child. Keep in mind, as long as expenses are utilized for qualified education expenses you are not taxed, however funds utilized for other reasons may be subject to penalties.
Louisiana has a great 529 plan that not only allows for state deductions but also matches your contributions.
A Coverdell Education Savings Account (ESA) provides another option to save for college. An individual is able to contribute $2,000 (2014) per individual towards college funding. Although the contributions are not tax deductible, just as 529 plans, earnings grow tax free if used toward educational purposes.
The key advantage of Coverdell ESAs are the account could be used for elementary and secondary education.
Even if you save a small amount, stash something away consistently to pay toward the cost of college for your loved ones or yourself. You will be amazed how this money can really add up!
Remember: your choice, your future!
Kemberley Washington is a certified public accountant and a business professor at Dillard University. She is the author of The Ten Commandments to a Financial Healing.
Get the most out of your 401(k). While it is great to participate in your company’s 401(k) plan, be careful when selecting investments. If you simply hate risk or have a fear of losing money, you may never get the most out of your 401(k).
Be mindful that your investment funds need to keep up with rising costs. Therefore, simply putting money into short-term investments such as money market accounts will not help you reach long-term financial goals. Select an asset allocation that best fits your needs.
Pay yourself $10 a week … at least. If you are living on a fixed income and have struggled to build up an emergency fund, pay yourself $10 a week for a year. This will give you a little more than $500 at the end of the year.
After you have reached that goal, double up in the following year to really build your rainy day fund.
Adjust your expenses. Sometimes we find ourselves with a high overhead and simply think it will always be this way. However, I challenge you to do something about it.
Take a long look at your housing payments, automobile loans and other overhead costs. Then, determine how to cut expenses. This may mean selling your home with its expensive mortgage costs and buying something that is more affordable. Or, it may mean trading in your car for a lower monthly auto loan payment.
Simply put, cut expenses you do not need.
Kemberley Washington is a certified public accountant and a professor at Dillard University in New Orleans. She authored an ebook, Let your budget inspire you. Follow her on Twitter or connect with her Facebook.
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Rising living costs, uncertainty surrounding Social Security and the ups and downs in the economy make it essential that you contribute to a 401(k).
If you are in your 20s or 30s, you may think retirement is too far away to start saving. If you are in your 50s and 60s, you may think there is nothing you can do at this point. But the reality is that contributing to your 401(k) is essential at any age. Continue reading>>>