Financial Matters: College savings help

PORTSMOUTH, Va. (WVBT) - Sylvia Sutherland with BayPort Credit Union to help us understand the options for stashing away that extra money for the little (or no longer little) one's college fund. It's all about education planning!

For further information please visit www.bayportcu.org

Here are some Basic Options that are available:
*Savings Account – BayPort offers a unique Fast Start Savings account for our Young Investors under the age of 25. This account pays 5.00% APY on the first $500.00; has a tiered dividend structure and only requires that you deposit $10.00 per month.
*CDs

Here are some Better Options that are available

* Maintain funds in a way that will provide tax savings (tax favored vehicle) and can choose investment vehicles that can provide potential for greater return w/ preservation of the funds.
* Coverdell Education Savings Account (formerly Education IRA) – allows you to save for education expense by allowing your earnings to grow on a tax deferred basis; withdrawals are tax free from federal taxes when funds are used to pay for qualified education expenses for higher education (includes college) and k-12 expenses. Limitations - $2k per beneficiary each year; Time/Age restrictions for beneficiary; Income restrictions (owner of account); Can choose a range of investment options to meet your need.
* 529 Plans –administered by states and higher education institutions; provides the tax advantaged option where your earnings are withdrawn on a tax free basis when funds are used to pay for qualified education expense after high school (college, etc – not k-12) tuition, fees, books, etc. Key benefits: max contribution is determined by the program; many in excess of $300k per beneficiary ($350k in VA); No income restrictions; No time/age restrictions for beneficiary; Parents can open for children, grandparents for grandchildren; aunt to niece; etc.
Two types:
* Prepaid Tuition (Guaranteed Savings Plan)-pay for the tuition ahead of time based on today’s rate by either one time lump sum payment or monthly payments. Program pools the money, invests it to guarantee that your child’s tuition will be paid when they are ready for college. Administered by the state that normally requires that either the owner or beneficiary must be a resident of the state as required for VA. (Virginia Pre-paid Education Program- VPEP).
* Savings Plan – same tax advantage; owner can decide how much and how often you contribute while earnings are based on performance of underlying investment. Allows you to choose a portfolio for more growth while child is young then becomes more conservative when the child reaches college age. Virginia offers the plan: Virginia Education Savings Trust (VEST).
 

More info:
• www.collegesavings.org
• www.savingforcollege.com
• www.virginia529.com or 1-888-567-0540
 

Finally, if college is right around the corner and you don’t have the time and money to save there are other options available to include student loans, grants and scholarships. One great source are the many scholarships available. BayPort offers over $50k in scholarships for our members. The deadline is March 29,2010 @ 3pm.