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It is no hidden fact that US colleges are painfully expensive, often dangling students on strings of student loan payments and scholarship maintenance.  In recognition of this unavoidable difficulty, September has been deemed College Savings Month.  For that, we have compiled a list of saving-savvy practices to help ease the financial burden of both students and their families.

Ways to save:

  • Ever heard of a 529 plan? If not, you aren’t alone, as only 3% of Americans utilize this excellent provision. 529 plans are accounts that hold your money tax-free, as long as the money is used to pay for college.  This option is considered one of the most effective strategies to save for college.  However, acquiring the plan can be a confusing process, so be diligent when setting it up.
  • An Education Savings Account (ESA) is another excellent option. Also known as an Education IRA, this plan allows parents to save up to $2000 per year, per child.  This investment grows tax free, which could result in serious financial benefits towards college down the road.
  • If you are looking to implement a long-term plan, it may be in your best interest to avoid using normal savings accounts. Unlike 529 plans, the interest on savings accounts are low, and the money it holds may not be able to keep up with ever increasing inflation.
  • A slightly loophole strategy is the use of Roth IRAs. This account allows you to invest after tax money in preparation for retirement.  Though you are usually not allowed to withdraw the account until after you are 59 and a half years old, the rule allows it to be used sooner for the purpose of college payments.
  • Automating your savings can remove the aspect of human error from your savings attempts. By setting up part of your paycheck to go directly into a 529 account, you can guarantee a consistent flow of money into your college fund.
  • Finally, the most important aspect of saving for college is diligence. Set goals, make plans, and start early.  The earlier you start, and the more disciplined you are about contributing to college savings, the more money you will have accumulated when it’s time to open the wallet and pay for your education.

If you have additional questions, contact the Office of Consumer Affairs and Business Regulation by calling our Consumer Hotline at (617) 973-8787, or toll-free in MA at (888) 283-3757, Monday through Friday, from 9 am-4:30 pm. Follow the Office on Facebook and Twitter, @Mass_Consumer. The Baker-Polito Administration’s Office of Consumer Affairs and Business Regulation along with its five agencies work together to achieve two goals: to protect and empower consumers through advocacy and education, and to ensure a fair playing field for Massachusetts businesses. The Office also oversees the state’s vehicular and customized wheelchair Lemon Laws and Arbitration Programs, Data Breach reporting, Home Improvement Contractor Programs and the MA Do Not Call Registry.

 

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