One way for parents in the United States to start saving for college when their child is still very young is called a 529 plan. The plans are named for the part of the federal tax law that created them in nineteen ninety-six. All fifty states and the District of Columbia offer them.
Private investment companies operate most of these plans, and each state has its own rules. Many plans are open to families from other states.
Five twenty-nine plans offer different investment choices. Families must decide how aggressively they want to put money into stocks, bonds or other investments that can rise or fall in value. There are limits on how much families can put into 529 plans.
Another choice is called a prepaid tuition plan. Parents can pay for an education at a public college or university in their state while their child is still growing up. But what if the child decides to go to school out of state, or not at all? The money can go to educate another family member, or the parents can withdraw it and pay taxes on the gains.
There are other ways to save for college while also saving on taxes. One way is to put money for a child into what is called a custodial account until the child becomes an adult.
And that's the VOA Special English Economics Report. I'm Faith Lapidus.
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2013-11-25
2013-11-25
2013-11-25
2013-11-25
2013-11-25
2013-11-25