Saving For College What Every Family Should Know
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Saving for College: What Every Family Should Know
Summary
Higher education is expensive, and many families find it challenging to cover the annual tuition costs. Some college students work while studying or take out student loans to manage expenses. A proactive way to reduce stress is to start saving early using various methods.
U.S. Savings Bonds
U.S. Savings Bonds are a popular savings option for many families. Series I Bonds and Series EE Bonds both offer the opportunity to earn interest for up to 30 years. For instance, investing $100 monthly in U.S. Savings Bonds could amount to $24,609 in 15 years, although this depends on current rates and your saving capability. The interest from these bonds is exempt from state and local income taxes, with federal taxes deferred until maturity or redemption. If the funds are used for qualified higher education expenses, the interest may even be excluded from federal income taxes.
Certificates of Deposit (CDs)
Certificates of Deposit (CDs) are another common saving method available at most banks. They generally require a larger initial investment, usually a minimum of $1,000. CDs allow the interest earned to roll over, meaning you can earn interest on your interest. However, unlike U.S. Savings Bonds, interest on CDs is subject to annual income taxes.
Other Options
If savings aren't available for college tuition, students can opt to take fewer classes, paying for each course individually. This approach helps avoid the burden of full-time tuition when funds are tight. Additionally, financial aid, student loans, and payment plans are often available to qualifying students, making a college degree more accessible.
Important Note
The information provided here is for reference only and should not replace professional financial advice. For guidance on taxes, investments, or college funding, consult a financial planner.
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