A Penny Saved

This post is the fourth in a series of 10 that covers each point of the MSN Money top 10 mistakes and hopefully will elaborate and add a little new parent thinking to the equation.

Money Mistake 4:

Delaying saving for College

Most parents start fretting about tuition when their kids are entering high school - way too late.

Take the money you saved by not buying life insurance for your baby and put it into a college savings account of some sort. He/She will thank you in 18 years. There are two common college savings accounts, the Coverdell and the 529. Both allow for tax-deferred or tax-free growth as long as the funds are used for qualified education expenses. There are many other options that include a simple savings account. Each option can have significant tax repercussions and you should speak with your tax professional before beginning on any of the above. Oh, and A penny saved does not qualify as a tax professional in case you were wondering. My wife and I haven’t decided exactly the route we will take, but I do plan on us beginning to save as much as we can towards our child(ren)s education(s). From the research that I have done, it appears that it is smart to keep the savings in the parents name unless the parents make close to $200,000 or more a year(AGI). At the $200,000 mark, the tax benefits of transfering the money into the childs name may outweigh the potential loss of grant and loan eligibility.

Part 3: Buying life insurance for baby

Part 5: Forgetting whats most important: Retirement savings

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