Most parent worry about the college fees and how to save for it. College tuition fees are sky high in the USA. Both Public and Private colleges are increasing the fees 5-10 percent in the last year or two. Reputed 4 years grad public colleges is now costing around 20,000/Yr and private colleges around 40,000/yr as of 2011. So the 4 year college fee will be about 80 to 90K in public colleges.
Here are some tips for parents and students that we see to have helpful;
- Save early in Coverdell educational funds and/or 529 plans. Most banks offer Coverdell and one may save tax exempt about $2500 / yr each child and about $ 3000 / yr in 529 funds. These funds can be used for college education in USA and are transferable between kids. More details on both the college saving funds are given below:
529 plans:
An Introduction to 529 Plans - http://www.sec.gov/investor/pubs/intro529.htm
Your guide for college savings - http://www.savingforcollege.com
Coverdell Educational plans:
Coverdell Education Savings Accounts - http://www.finaid.org/savings/coverdell.phtml
Intro to ESAs - http://www.savingforcollege.com/intro_to_esas
Check with your banks first if they offer either of the two educational savings plans.
How the funds grow:
Once you have opened either one or both the accounts, you have the option to choose what instruments you want to invest the funds. you have the options to grow in mutual funds (market risks involved) or in CDs/Bond (low risk)
Tax Exemption is provided for both the accounts and please check with banks when opening the account and with your tax accountant.
Summary: Each year one can save about $5500 per child with some tax exemptions. So if you start early and save for about 10 years, you may be able to save about 60 to 80K per child towards college expenses.
