Three ways parents can start investing for college

It's never too early to start saving for your child's education. Credit: Getty Images
It’s never too early to start saving for your child’s education.
Credit: Getty Images

Whether you’re starting a family or have a child in high school, chances are the cost of college is not far from your mind. Investing, especially if you’re still in the family-planning stage of life, can be a great way to maximize your savings.

Here’s a rundown of some ways to grow your money for education:

529 College Savings Plan: This tax-advantaged educational investment account helps you stash away cash for college (or other post-high school trade schools). A 529 allows money to grow tax-free, and withdrawals are tax-free as long as the money is used for qualified expenses. Even if you don’t have kids now, you can still open an account under your own name now and simply change it later. Many 529 plans give the option of picking investments from a menu of funds, or selecting a general age-based plan where your money is automatically managed according to the date at which you expect to start paying tuition.

Each state offers its own 529 plan. You’re free to use a plan from any state, though keep in mind that each state has its own guidelines for tax deductions on contributions, up to $13,000 per contributor each year. If you’re not an experienced investor, you might feel more comfortable in an age-based plan.  If you are comfortable selecting funds, you may be able to get a better return with your own management.

Your action plan: First, check to see if your state offers a write-off on contributions. If it does, that’s likely your best deal. If not, shop around and look for a 529 plan that offers Vanguard funds, which are low cost. Learn more about the options in your state: New York, Pennsylvania or Massachusetts.

Coverdell Education Savings Account: This is another kind of tax-advantaged account where money can grow tax-deferred and withdrawals are tax-free for qualified expenses. Unlike with 529 plans, funds can also be used for elementary and high-school expenses, including uniforms. One drawback is that you can only put away only $2,000 per child per year and contributions are not tax-deductible.

Regular Investment Account: If you want to get a head start on general saving, a regular investment account is another option that is a better than just storing money in cash savings. With a long-term goal like college for a young child, you can afford to take more risk to grow your savings. Unlike with special education accounts, there is no tax advantage — but there are also no qualifications or limits for withdrawing funds whenever you need them.

These are just general guidelines to help you get started, so do some research to see what the best plan is for you. The earlier you start, the more likely you (and your children) will be able to handle the cost.

Jon Stein is the founder and CEO of Betterment, a leading online investing company that delivers smart, personalized financial advice paired with low fees and a superb customer experience. As a special offer, Metro readers can start a Betterment with the first 90 days free. Got money questions? Hit us up at metro@betterment.com.



News
Entertainment
Sports
Lifestyle
Local

FDNY debuts new fire simulator for blazes at…

The New York City Fire Department christened its newest, state-of-the-art, custom-built simulator at its training academy on Randall's Island Tuesday.

Local

Bronx cop saves baby who stopped breathing

A Bronx police officer is credited with saving the life of a 2-month-old baby who stopped breathing Tuesday morning. Police Officer Johnny Castillo, 38, was…

Local

Brewer celebrates Women's Equality Day with voter pledge

Manhattan Borough President Gale Brewer celebrated Women’s Equality Day Tuesday by pledging to register at least five women voters before the Oct. 10 deadline. Brewer…

Local

NYPD looking for lewd D train rider

The NYPD is enlisting the public’s help to find a man they say performed a lewd act on the D train Saturday evening. The incident…

Entertainment

QUIZ: How many English words do you actually…

Are you as smart as you say you are? Are you a word nerd? Take this quick vocabulary test to find out if you're a true wordsmith. Good luck.

Television

'Pretty Little Liars' recap: Season 5, Episode 12,…

If you've wondered whether Ali and Bethany knew each other, you got an answer tonight: Yes, and in a very tangled way. But many lingering…

Entertainment

Cymbals Eat Guitars Have Everything to 'LOSE'

At its most basic level, a rock band can be thought of as a family, a group of people selflessly devoted to a cause. When…

Entertainment

"Bachelor in Paradise" recap: Episode 4, 'Week Four'

Some things are hard to watch in a “Human Centipede” sort of way. Other things in an “American History X” sort of way. Does “Bachelor…

College

When are 2014 college football playoffs? (Schedule, date,…

When and where are 2014 college football playoffs? A look at the schedule, date, TV, time for the semi-finals at championship game.

NFL

Dimitri Patterson suspended only for rest of preseason…

Dimitri Patterson ended up getting just a slap on the wrist.

Sports

Eugenie Bouchard excited for 'rowdy' fans at US…

Eugenie Bouchard is sure to endear herself to New York's tennis faithful as she tries to win her first grand slam title across the next two weeks.

MLB

MLB Power Rankings: Angels and A's still at…

MLB Power Rankings: Angels and A's still at top, Nationals climb

Wellbeing

Who is having the most orgasms?

  Single lesbians report having orgasms more often than heterosexual women but both gay and straight men still come out on top of the climax…

Home

Jonathan Adler shares his tips for a great…

Jonathan Adler took a break from boogie boarding at his beach house to tell us how to keep that Labor Day party festive.

Travel

Most popular Labor Day weekend destinations

Priceline.com released its Top 20 destinations for the end of summer, including Labor Day weekend. If you’re heading to any of these spots, expect a…

Wellbeing

Working your way to type 2 diabetes: Job…

When it comes to type 2 diabetes, a stressful job can be as risky for your health as a bad diet and no exercise. A…