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While a savings account pays interest, there are other ways to build your money with some added benefits — such as having it grow tax-free.
Individual retirement accounts (IRAs), 529 plans, and prepaid tuition plans are savings options that often offer tax advantages.
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State-sponsored college savings plans are often called "529 plans," after the section of the IRS tax code that authorizes them. Each state determines the maximum amount your parents may contribute annually per child.
Prepaid tuition plans
If you plan to attend an in-state school, a prepaid tuition plan may be a good option. Carrying low risk and offering tax advantages, these programs let you lock in tuition at the current rate. Under this plan, your state promises the amount you set aside will buy the same amount of tuition at a state school in the future.
The following saving-for-college plans are discussed in detail in Helping parents plan: Saving for college.
* 529 plans
* Coverdell Education Savings Accounts (ESAs)
* UGMAs and UTMAs
* Individual retirement accounts
Labels: Helping Student Plan