College Planning:Easing the Financial Burden

Advice from CPAs

Easing the Financial Burden

• How you’re going to pay for children’s college education?

– The numbers can be overwhelming– It won’t be easy – It will take planning, research and belt tightening– It might even take debt

Easing the Financial Burden

• Funds for paying for a child’s college education will usually comprise three sources:

– Savings– Financial aid – Tax relief

• You should not save for college at the expense of your own retirement savings

Easing the Financial Burden

• It pays to start early

• Take advantage of the power of compounding– The earlier you start the more interest

you will earn and the more you will save

Easing the Financial Burden

• Consider how to allocate your assets– Stock Market– Short-term bond funds– Money Market fund

• You want to know the money is available when you need it

Easing the Financial Burden

• Valuable tax breaks to consider while saving for college:

– 529 Savings Plan/Qualified Tuition Program– Prepaid Tuition Plan– Coverdell Education Savings Account– Uniform Gift to Minors Act– Savings Bonds

Easing the Financial Burden

• State-sponsored 529 Savings Plan, also known as a Qualified Tuition Program

– Earnings and distributions are tax free– No income limits on contributions– Investment minimums are low– One child can be beneficiary of more

than one account– Assets managed by a professional financial

services firm

Easing the Financial Burden

• Prepaid Tuition Plan– Pay future tuition at a state college

at today’s lower rates

Easing the Financial Burden

• Coverdell Education Savings Account– Save for college the same way to save

for your retirement

Easing the Financial Burden

• Uniform Gift to Minors Act• Unlimited investment options

– Parental control over assets– May be subject to “kiddie tax”

• Savings Bonds– Series EE and I bonds

Easing the Financial Burden

• Nest Egg Falling Short?– Use of financial aid– Loans– Tax credits and deductions

Easing the Financial Burden

• A few more options…– Advanced Placement classes– Community College– Postpone for a year– Volunteer

Easing the Financial Burden

• Useful Tips…– Involve your child in the financial

planning process– Encourage frugality– Begin saving as soon as possible– Encourage your child to be an achiever– Make a joint effort