January 12th, 2010 Saving Money for Baby’s Future
You can save on taxes if you set up a savings account for your baby. The Uniform Gift to Minors Account allows people and relatives to give money to your child and not be subject to gift taxes. The maximum allowed per year is $13,000. Then, when the child reaches age 18, the money is theirs to do with as they please, preferably something meaningful like college. You can also set up the account so that you can be in on the money spending decision.
There are also 529 College Savings Plans. These are set up in each state as a way to save money for college. You can get a certain tax deduction for the contributions. But the best benefit, is that you can be guaranteed a preset tuition rate for state schools. In other words, lock in tuition at today’s prices. Some institutions offer this as well, and the federal government has their own. But the one from the feds will not get a tuition break.
Look into buying zero coupon municipal bonds. For example, in California, if you can spend $7,400 a year on a $25,000 bond, it will mature when your child begins college. You would end up with roughly $200,000 for a fraction of that actually out of pocket. Do some math on other interest free bonds and their maturity date. You will be surprised as to how much the bonds grow over 20 years.
>>More tips on saving money for college.
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