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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!
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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.
One of the financial issues I struggled with early on was simply saving money. Every single time I would dedicate some cash to saving, I would find myself dipping into my savings. So, I realize that in order to conquer this struggle, I had to do something different. Just like the old saying goes, “If you keep doing the same thing, you are bound to get the same results!” So, I decided it was time for a change.
Be diligent and you will profit
One of my favorite scriptures is Proverbs 21:5, which reminds us diligence will lead to profit, however if you are hasty it is certain to lead to poverty. So one of the ways I conquered my lack of savings was to incorporate savings bonds in my regimen.
Of course, savings bonds will not get you rich at all! But this isn’t its purpose. Savings bonds should be used for building cash reserves. And that is exactly what it did for me. I diligently saved a little from each paycheck and in the end was able to profit. Since I wasn’t able to withdraw the money until a year later it FORCED me to save, and I needed the FORCE! Keep in mind, if you may need the money before then, think of other clever ways that will force you to save.
When a little becomes a lot
I love the saying you can only chew an elephant a bite at a time! Well this is also true with your saving goals. You don’t have to commit to hundreds or thousands per paycheck, but be consistent and commit a set amount each time. Simply saving $50 per month would yield $600 per year. No matter what amount you save, keep at it, don’t touch it, and act like it doesn’t exist!
Can’t touch this
Lastly, one of the ways that has helped me in the past with savings is simply acting as if it doesn’t exist. After I have set aside money toward my savings fund, I simply forget about. I save first and whatever cash I have remaining is the only cash I utilize for spending. This way, when I run out – I simply run out. And more importantly, my savings is still left in tack!
Take the savings challenge! Commit this month to save a little bit more! Drop us a line and tell us what you are doing to save more money for the month of June at Kemwashcpa@gmail.com.
Remember: your choice, your future!
Kemberley Washington is a CPA and professor at Dillard University. Follow her on Twitter @kemwashcpa.