I want to start a Bank account for my two year old for college whats the best method for going about this?

Question

My parents didnt have any money for me when I got older so I want to make sure my son has a fighting start when he is older for college...If any body has any suggestions for the best way to go about saving money for this please let me know it would be greatly appreciated.

Answer 1

If you are saving for college expenses, you should  take advantage of federal tax breaks aimed at families saving and paying for college. These include the following:  



Qualified Tuition Programs (529 plans)—Earnings grow tax-deferred and distributions are tax-free when used for qualified post-secondary education costs.



Coverdell Education Savings Accounts— Earnings grow tax-deferred and distributions are tax-free when used for qualified post-secondary education costs. May also be withdrawn tax-free for primary and secondary school expenses.



However, don't invest more in these than you child will need for college.  There are tax penalties for non-educational withdrawals.  Additional funds should be invested in a UGMA or UTMA.



For more information read this link, where most of this information comes from:



http://www.savingforcollege.com/



I may also add that you should also be putting the maximum away for your own retirement now in 401k's and IRA's, before saving money for your child.  If you max out your retirement investments now, you can put in less later on,  and have more money to donate to your child then.  Also if it turns out your child is not college material, you won't have to pay the withdrawal penalties from a 529.  Your child can always borrow money to fund her college, you can't borrow money to fund your retirement.   Get your retirement squared away first; the last thing your child wants to do is have to support you in your old age, because you didn't plan ahead.

Answer 2

College savings plans are a good bet.  The income to them is not taxed and the best one I've found is Iowa College Savings.  The funds are managed by Vanguard so there are low maintenance charges.  Here's the web site:

https://collegesavingsiowa.s.upromise.co...