If you’ve decided that you want to create a college fund for your child, there are lots of ways to make that happen. Some of the best things you can do are getting your child and family involved, and looking into tax-sheltered plans.
Keep in mind that tax-deferred accounts may have income dependent contribution limits and tax penalties for withdrawing from them that can change through the years due to politics and changes to the tax code. So, please check with the IRS to make sure that the information you’re basing your decision on is up to date.
Another thing to keep an eye out for as you’re weighing your savings options is the ability to change the beneficiary of the account to various other people in your family, including yourself, if you need or want to do so. It’s also good to make sure that if you have multiple children you set up separate college savings accounts for each child to make sure that you are allowed to save the maximum amount per child per year with no confusion at tax time.
A Coverdell Account –
Contribution limits are income dependent but are generally about $2000/year. You can use the money in this account for things beyond college.
529 Plan –
some states offer a state income tax rebate for contributing to them, but most don’t.
Texas Tomorrow Fund, etc.