Since saving for college should take more than five years we need to consider it a long term investment. Just like saving for retirement there are types of accounts that have tax advantages. The most widely used plan is called a 529 plan.

All 529 plans are sponsored by a state. Meaning there are 50 different 529’s (I have a quick guide here). You can put your money in whichever state plan you want and can spend that money at whatever college you would like to. The money going in is post-tax (meaning you have already paid taxes on it) and grows tax free (meaning you do not have to pay any taxes on the interest) if you you use it for college expenses, such as tuition, fees, books, supplies, and room and board. Basically the 529 is the college savings equivalent of a Roth IRA.  Many states offer tax deductions on state income taxes for residents if you contribute to their plan.  If you live in one of these states you will want to contribute to your state’s plan.  If your state is not listed here you will want to choose a different state.  Any state not listed on this list either has high annual fees or requires you to purchase the plan through an intermediary that will charge you a commission.

There are a few other rules you have to follow with these plans. The first is that they are associated with a single beneficiary. So if you have kids that will be in college at the same time they will each need an individual 529 plan. You can, however, transfer the plan from one beneficiary to another. Therefore if you have two children that are more than 5 years apart (the average student graduates in five years now) you can transfer the account to the younger child before they go to college. Now everyone thinks their child is a genius and, some of them, are smart enough to get scholarships. If this were to happen you can transfer that money to a sibling or relative or it can be withdrawn. If the money is withdrawn for non-higher education expenses then you will have to pay the taxes on the interest earned and a 10% penalty. I was just in a financial class where a young lady, whose parents used a 529, had done just that. She used the money to put a down payment on her house. What a great set of parents!

The only other thing you need to remember is to use the mutual fund investments available in these plans.  You don’t want to be investing in bonds or money market accounts.  These are long term investments and should be treated as such.  Do your home work but invest in mutual funds.

In part three of this series I will be discussing the other tax advantaged type of college savings account.  See you there!

Being the youngest child by eight years has its perks. You get to watch everybody else go through life and learn from their mistakes. Through multiple sources the message has come in loud and clear that understanding how to save for your children’s education is important. In this four part series I am going to cover my journey in understanding the options that are available to us all. I hope this helps a lot of people since for some reason we keep producing these little mongrels and feel some obligation to prepare them for adulthood.

The first rule of saving for anything is to start NOW!! College is coming and kids grow up fast. I have a niece who will be turning 16 in January. The time has gone by so fast and it is hard to believe that little girl is only four years younger than her mother was when she got married (if any of you felt a wince, it came from my brother).

So now that you have separated some money in your budget for college savings where should we put it? Tomorrow we will look at one of the best choices for making that college money grow.

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BUT IT’S ALL OVER THE GROUND! Do you realize how much money you walk by every day? Maybe it is only 30 cents a day, but that translates into $109.50 a year just for bending over and picking up a few coins. On and off I get serious about hunting for change. Whenever I do see change, whether I was truly looking or not, I always pick it up. I mean, it’s free money (and if you have read this blog at all you know my favorite word is FREE!). Since I do not have a lot of experience with this I thought I would check the Internet for some experts and I found fanatics. It is amazing where you can find change and here are a few of the bloggers who document their findings.

The New York City Change Pot: Change has to be everywhere in big cities.

Found Money Jar : This guy also picks up bottles and cans and invests the money with a running total and stock portfolio from his found money.

Thoughts from the Change Race & Race of the Century :These guys are friends that made a challenge to see who could find $100 in change first. Now they just hunt for money. I wonder if my buddy Joe would be up to a challenge like this?

Found on the Ground : This site is solely devoted to things found on the ground. Everything he finds he takes pictures and posts here, well, not everything just interesting things.