With consistently rising education costs, college savings planning is a necessity. But which plan is right for you? Consider your financial situation now and in the future, the age of your child when you start, and then set reasonable goals for yourself.
Federal Government Plan
Saving money for college can be accomplished courtesy of the US government. Your Congress sponsors the Coverdell ESA (education savings account) plan for those earning less than $110,000 (single tax filer) or $220,000 (joint tax filers) per year.
Although it has a modest annual contribution limit–$2,000 per student per year—withdrawals are tax-free if used for qualified education expenses. Qualified expenses include tuition, room, board, fees, and supplies.
You’ll also enjoy personal investment flexibility, as you can invest in stocks, bonds, mutual funds, and cash equivalents. You have no restrictions on the number of trades (buy or sell) you want to make.