[Youth-list] PTA Parent College Prep Series: Financing College

[Elizabeth Shack]

The PTA Parent College Prep Series
  If you have a high school student in your house, it is likely that the subject of college has come up more than once. Even if your children are much younger, it is never too early to start thinking ahead. 

As a parent, you may find the idea of sending your child to college overwhelming, but The PTA Parent is here to help! Over the next few weeks, we will bring you a series of articles that will help your family get ready for college.

Part 1: Financing College
The government expects parents to contribute to the cost of college. This means that parents need to develop a plan, and invest their money wisely so that sufficient funds will be available when it's time to pay for college. 

Investing early helps parents maximize their financial gains. But it is never too late to start saving. Below are several investment vehicles that parents might want to consider and discuss with a financial adviser. (Keep in mind that plan availability and restrictions can vary by state.):
    
     529 college savings plans-Federal income taxes are not applied to deposits or qualified withdrawals. Allowed annual investment in the account is considerably higher than for many of the other plans, and relatives may contribute. 
  
     Prepaid tuition plans-Under this type of plan, credit hours or semesters are purchased at today's prices and are then redeemed in the future, regardless of cost increases. These plans are usually limited to tuition and fees. Typically, the beneficiary has to live in the state of the plan in which they are enrolled.
  
     Roth IRA-Assets grow tax-deferred; after five years, funds can be withdrawn tax-free for individuals who are at least 59½ years old and spent any way the contributor desires. There are limitations on how much can be invested annually.
  
     Education IRA (Coverdell Education Savings Accounts)-Assets grow tax-deferred. The funds may be used towards qualified expenses (such as tuition, fees, books, etc.) in elementary, secondary, or higher education. An additional benefit is that corporations and other entities are allowed to make contributions. 
  
     Uniform Gifts/Transfer to Minors Act Accounts- These accounts allow parents or relatives to transfer or gift assets to a minor--even real estate or art. When the child becomes a legal adult, he or she has full control over the account. Withdrawals from the account may be used for any purpose. 

  For more information about preparing your child for life after high school visit PTA Goes to Work. 
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