STEP FIVE:
College Funding for Children
By Step 5, you've paid off all
debts but the house, and you've started your retirement savings. Now it's time
to save for your kids' college expenses. College tuitions and housing expenses
continue to rise. Don't let college sneak up on you. Saving now will put you
ahead of the game when your kids graduate from high school.
Two smart ways to save for your
kids' college are 529 college savings funds or Coverdell ESAs (Education
Savings Accounts). These are both tax-advantaged savings vehicles that let you
save money for your kids' education expenses. As with retirement, you can also
spread the money across the four types of mutual funds: growth, aggressive
growth, growth and income, and international.
Both 529 plans and ESAs allow
you to save money in an individual investment account. But do your homework
first! Depending on your income and what state you live in, a 529 might be
better than an ESA. All that's left then is to get started!
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