Saving Money for Your Child

L.,

You are smart to start early. It is estimated that by 2025 when your son is 18, it will cost $140,000 for him to attend state college for 4 years.

Our family set up a 529 college savings plan with Putnam for our children. It earns about 6-7% interest annually and is eligible for tax shelters because it is used specifically for college. If you can put about $75 per month away in a fund like this, you will have enough to pay for college by the time he goes.

Our financial advisor also suggested that we have our children take out student loans despite the fact that we have the money to pay for college. Why? Student loans are interest free until the student graduates so you can keep accruing interest for 4 more years in your savings plan. Then your child can pay off the loan when he graduates and start his adult life with a great credit record.

Best of luck,
S.

L.,hey my name is N. I have one son and his name is Larson and he is 18 months old.I have been doing the savings bonds for him since he was a newborn.It,s good b/c anybody can go to their local bank and get these.I also have him a Roth fund through the bank which is pretty much a school /college fund.Also they have IRA's which you can put money in and you can make a little money on the interest.Also CD's as well.I went to speak to a Whitney banker that's also a friend to help me decide.So go to your bank and see which one is more suitable for your family.Take care and good luck.

I would go with the 529 plan. I'm in Louisiana, and we've already earned $360 (on $5,000) since January. Also, I think the money was tax deductible.

L.,

There are several good ways to save for your child. The best savings account really depends on what you are saving for. If you are saving strictly for college, a 529 is the best choice for your money to grow, as someone else mentioned. They usually take about $250 to start. If you are saving for private school education, look into a Coverdell IRA. It has tax benefits that could really help. I highly suggest also saving money for him separately for other things that might come up - help with buying a car one day, money for a school trip, whatever you think is best. This should be done in a regular savings account. Usually you can get the best rates on these at a credit union instead of a bank. It really helps a child when they are a little older to learn what saving is all about if they see what you have done for them. I hope this helps.