Thursday, December 15, 2011

Time deposit in banks or educational plan???

i have a 2-year-old daughter but right now i'm thinking how to save money for her future. let's focus first for her college education...





actually, i have 2 options in mind: save money in banks through time deposit or apply for an educational plan...





but i heard advantages and disadvantages for both of my options and i'm confused on what to choose.





i badly needed opinions on these. thanks!|||You didn't give me enough information for me to give you a comprehensive answer.





First thing you have to figure out is do you anticipate that she will be able to get financial aids. That will depend on you and your daughter's asset and income level.





If you do not anticipate receiving financial aids b/c of your asset/income, then the 529 plan is your most tax efficient way to save for college.





If you do anticipate financial aids, then shifting assets around to maximize the financial aid package is important. In this scenario, putting money away for your retirement planning is far more important. This money if done right will not be counted as a resource in the financial needs calculation. But you still have the option to take this money out to pay for college expenses. Remember as a last resort there are plenty of loans available for education purposes but there is no loan available for retirement purposes.





Lastly, do you have adequate amount of life insurance? All the education planning is useless if something happens to you. There are various kinds of life insurances. There isn't one kind that's better than the others for everyone out there. Again I can't give you more advice without knowing your situation.





I can tell you putting money in the bank is probably your worst bet. Let's say you're getting 4% on a long term CD but average inflation is 3%, so where's the gain?|||here is what i did for my niece -- you can give someone up to 10k a year with out any tax problems. i put the first 10k in cd in her name -- you will have to be listed as trustee. but the interest is in her name.





than i put 10k in her name in a mutual fund which i will let the gains ride in the fund.





next year i will get her another 10k cd





she can draw up to 1600 of unearned income in her name a


year with out effecting your taxes.





when she gets close to the 1600 limit instead of rolling over the cd's and leave the interest with the cd i will start taking the interest and buying saving bonds -- yes i know they do not pay much interest but the interest is not taxable until cashed at that time she will be a student.





good luck and glad to see someone is thinking about the future.|||There are college savings plans in each state called 529 plans. Check out what your state plan offers. Some states have good plans (good investment choices, low costs) and some have bad ones. Check out Money magazine in the library they usually rate them each year. Some states offer a tax deduction for residents that put money in their state plan. That is a good deal if your state plan is good.


If your state doesn't have a good plan or if it doesn't offer a tax deduction you will be better off investing in another state's plan. Again Money Magazine will give you a good suggestion.


The advantage of a 529 plan is that you may get a tax deduction, the money grows tax free and isn't taxed when used for college. (check details of the plan). The 529 plans usually start off the investing more agressive when the children are young and then as they get near college age the investment are more conservative. The disadvantage might be what happens if your child doesn't go to college or if you pick your state's plan doesn't go to a college in your state. Check the details.





This seems better than just a savings plan.

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