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Now is the time to save for college

Published 10:58pm Thursday, April 18, 2013

By Nathan Rice

In just a few short weeks we will begin hearing Pomp and Circumstances throughout the seven cities. Graduates will walk, tassels will be turned, speeches will be given and families will gather while parents beam with pride. Invitations will be sent, Hallmark will stock up on graduation cards and those cardboard Congratulations Graduate! signs will pop-up in yards as celebrations begin.

Some graduates will enter the work force immediately or enter a trade school, but there are many who desire to continue their education at a chosen college or university.

Unfortunately, a quick Internet search on college expenses will inundate you with news stories telling how college expenses are increasing every year. Every pundit has his or her own opinion for the reason behind the increasing costs, but regardless of the reason, families are now stuck with the question of how to prepare for the expenses associated with a four-year college degree.

The most important thing you can do is to start early. Your little angel may be in diapers now, but college will be here before you know it, and as every parent says, “They grow up so fast.”

For example, if you begin saving $100 a month when your child is born, you can save around $30,000 by the time he or she turns 18. If you wait until they are eight years old to begin putting funds away, your total savings drops to just over $14,000.

It is also wise to begin discussing your desire to save for college with your investment advisor or personal banker. Banking professionals and investment advisors can explain several savings plans for your young genius.

A VUTMA (Virginia Uniform Transfers to Minors Act) Account allows parents or other interested parties, such as grandparents, to make monetary gifts to minors throughout the year.

Depending on how the account is established, funds accumulated are not accessible to the minor until the age of 18 or 21. Dividends earned throughout the life of the account are reported under the minor, keeping them off of the custodian’s tax report.

A 529 Plan, named after Section 529 of the Internal Revenue code, is an educational savings plan that offers income tax breaks to those who contribute. These flexible plans allow the donor to retain control of the funds and can be opened by anyone for the child of their choice.

Coverdell Education Savings Accounts and U.S. Savings Bonds have been popular college savings plans in the past and can still be utilized, but there are many options that should be considered.

Regardless of how much or little you have, now is the time to start savings for future college expenses.

Nathan Rice is the Relationship Manager of the Downtown Suffolk branch of ABNB Federal Credit Union. He is a Hampton Roads native and can be reached at nrice@abnb.org.

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