5 Best Investments For College Savings

Looking for the 5 best investments for college savings? Many parents may feel that there are only a few plans to consider as investments for college savings. It is important to know your options when trying to save for your child's education, and the costs of college are only going up. Check out the options below to help you save money for your child's future.

  1. Consider investing in a 529 account. This is an investment account that is considered state-sponsored. The account allows you to set aside money specifically intended for college education. Taxes are deferred at the time of investment, and there will be no taxes at all when withdrawal begins, provided the money is used for qualifying educational expenses. This is something to consider when choosing the best investments for college savings.
  2. A Coverdell Education Savings Account is also tax-free at withdrawal. Investments into this plan can be as high as $2,000 per year. However, if congress does not extend the benefits, you will only be able to invest $500 per year after 2010, so act fast if you are going to choose this as one of your investments for college savings.
  3. Prepaid tuition plans can be a good way to start college savings. However, these may only cover tuition, and no other college costs, so check carefully to ascertain what exactly this covers before deciding if this can actually be considered one of the best investments for college savings.
  4. At one time, custodial accounts were considered some of the best investments for college savings. A custodial account is opened in a child’s name, and the taxes assessed on the interest income are figured at a child’s rate rather than the parents’, which are presumed to be higher. Legislation passed in 2006, however, changed the tax rules, making it impossible for children to take advantage of the lower tax rate until they turned eighteen. In addition, custodial accounts are taken into consideration when financial aid packages are being applied for, and can lower the amount of aid received.
  5. Some people choose to use IRAs (individual retirement accounts) as a means of college savings. One advantage to this is that early withdrawal penalties are waived on Roth and traditional IRAs when they are used for this purpose. However, you should remember that this is your retirement account before considering it as one of the best investments for college savings.


MSN Money

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