Save For Your Children’s Education

It was once thought that only the wealthy could save enough to afford a good college education for their children. That just is not true. There are plenty of ways for the middle-class and lower-income households to save for their children’s futures, as well.Consider the Coverdell Education Savings Account, which allows you to save up to $2000 annually for your child’s future education. You can make deposits into the account until its beneficiary reaches the age of eighteen. The contributions are not tax-deductible, but the distribution withdrawals are not taxed. This is a classic way to grow wealth and you will be able to use the money for most school-related expenses.You may also want to consider a College Savings Plan, one of two 529 plans available for college education savings. Under this plan, you can choose from a variety of investment options and you will not pay taxes when the funds are withdrawn to use for education.The second 529 plan is the Prepaid Tuition Plan. It basically allows you to pay today’s prices for tomorrow’s tuition. By pre-purchasing your child’s education, you lock in his or her future tuition at today’s prices.If you invest early in Savings Bonds for Education, they can work well to help finance your children’s future education. The plus to this investment is that the money can be pulled at any time to use in case of a financial emergency.If your child is approaching college age now and you have no savings on hand for their education, there are still tax credits available to you. Right now the American Opportunity Tax Credit is the best of these options. You can also qualify for lifetime learning credits, classroom expenses deductions, and tax deductions for higher education fees and tuition.The IRS usually does not allow a taxpayer to claim more than one large college savings plan on their income tax return, so you will want to be careful and deliberate in choosing the right option for you.You would probably benefit from a conversation with a financial planner to discuss the best way to save for your child’s future education, and remember that it is never too soon to start.