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Saving for College
Saving for College:
While saving for college, a good investment to look at is Series EE savings bonds - the federal tax on the interest is waived if it is used for tuition (for dependent or self). There is also no state or local taxes associated with them.
Most parents dream of sending their kids to college one day. But have they noticed what a decent college costs?
Today $50,000 is not out of the ball park. To save up 50 grand before your child reaches age 18 (if your child is under a year old) you will need to save about 100 bucks a month (less if you can beat 8% a year). Or you could put $10 - 15 grand away as a lump sum at the child's birth.
One other thing - in eighteen years from now, you know college is going to cost even more because of inflation. If four years of college costs 50 grand now (this is your basic private school + about 10k for a super cheap appartment and the child will need to keep a part time job to pay their own expenses.) if tuition increases at say 6% a year (a conservative estimate for tuition) in 18 years from now it would cost $135,000. This means you should be saving more like $300 a month. Scary!
Point is, you need to dollar cost average as much as you can each month into an aggressive mutual fund or the Series EE bonds or a blend of the two. If your child, as it turns out, is not college bound, you can use the money to buy them an SUV for their 16th birthday - or just keep the money yourself to upgrade your retirement expenses (take a trip around the world).
Saving consistently is the key, even if you are not taking advantage of the so called best place to invest your money based on historical rates of returns, or are missing out on some too good to be true dot com IPO - don't worry about it. By saving consistently a little bit as often as you can you will meet your goals. Who's to say what will happen in the future economy anyway and what that future economy will look like.
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