Here we go again!
Check out Dave Ramsey’s book “The Total Money Makeover” for an in depth explanation of this and the other steps to financial freedom.
Step 5: Fully fund Education Savings Accounts and/or utilize 529 plans.
Definition of a 529 plan: an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1998.
Definition of an Education Savings Account: a tax advantaged investment account designed to encourage savings to cover future education expenses. It is found at Section 530 of the Internal Revenue Code.
In other words, start stashing away money for your children’s college, even if they are infants. In fact, infanthood (Is that a word?) is the best time to start saving for your children’s education. The earlier you start the more attention you’ll be able to give to funding your children’s education. Using 529 plans or Education Savings Accounts will assist with this. These plans have certain income limits and/or fees so check the fine print before you sock your money into these types of accounts.
Visit http://www.irs.gov/ for the latest tax information regarding these types of accounts. And if you are worried about investing your children’s education money in stocks, I suggest putting them in safer, cash type investments while still using the 529 or Education Savings Account vehicle.
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