Saving for college
While a savings account pays interest, there are other ways to build your money with some added benefits — such as having it grow tax-free.
Individual retirement accounts (IRAs), state-sponsored savings plans, and prepaid tuition plans are savings options that often offer tax advantages.
Individual retirement accounts (IRAs)
Take advantage of government incentive programs that were originally designed for retirement needs: IRAs can help finance your education and reduce taxable income.
State-sponsored 529 plans
Your state may sponsor a college savings plan. They are often called "529 plans," after the section of the IRS tax code that authorizes them. Each state determines the maximum amount your parents may contribute annually per child.
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Prepaid tuition plans
If you plan to attend an in-state school, a prepaid tuition plan may be a good option. Carrying low risk and offering tax advantages, these programs let you lock in tuition at the current rate. Under this plan, your state promises the amount you set aside will buy the same amount of tuition at a state school in the future.
More information
The following saving for college plans are discussed in detail in the Helping parents plan section.