Money Talks, So Should You

Q&A: How should I save for my child's college fund?

Paul Dolce
by Paul Dolce, The Garrett Network

Start early, save regularly … the key to any successful savings plan. This applies to saving for retirement, a first home, vacations, and yes, even for college.

Faithfully setting aside even a small amount each month, or each paycheck, beginning when your child is young, will significantly improve your chance of meeting your college savings goal. If you can automate the process, so that you never see the money before it goes into savings, your chances for success will dramatically improve.

READ: College saving 101

Oh, but where to save?

Many turn to 529 college savings plans. These state-sponsored plans allow your funds to grow tax-deferred, and even to escape taxes altogether if you use the money to pay for qualifying college costs.

Unfortunately, 529 plans lack flexibility. Moneys deposited into these accounts, really need to be used only for college. Otherwise, your withdrawals will be hit with taxes on any earnings, and most likely you’ll pay a 10% penalty too.

Roth IRAs, or tax-efficient index funds, or exchange traded funds, held in taxable accounts, can often be a better savings choice for those in lower tax brackets, who have less to gain from the 529’s tax benefits. Funds in these accounts have the flexibility to be used for college, but also for other important goals, such as retirement.

Start early, save regularly, but stay flexible too.


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Paul Dolce, CFP, is the founder and principal of Financial Solutions LLC, an hourly, fee-only financial planning practice located in Columbus, OH. He has an MBA with Finance and Accounting concentrations from The Ohio State University, and more than 25 years of experience in both corporate finance and financial services.