Tax deferred savings for your kid`s college education - 529 plan.

Yes college is expensive, its no secret, the astronomical costs of higher education can be enough to derail your future plans of sending your kid to an Ivy League or other well known university in the US. According to the?College Savings Plan network?the cost of sending your 4 year old kid to a private college in 2021 will run you about $120,000 which includes, tuition, room & board and other incidentals

That is a lot of money.

This is a per year cost, so, assuming your kid goes to college for 4 years, $120,000 x 4 = $480,000, or, nearly half a million dollars to get a piece of parchment paper put up your child`s wall.

My advice, start saving now so that you can put your kids through college.

But how can you start saving for education in an intelligent and tax efficient way?

Hello 529 plan.

529 plan

The 529 college plan lets parents of kids and their relatives contribute to their college education through a tax sheltered investment vehicle. The money you contribute to a 529 plan isn't tax-deductible for federal income tax purposes. But, more than 30 states provide tax deductions or credits of varying amounts for contributions to a 529 plan.

Generally speaking, you'll need to invest in your home state's plan if you want a state tax deduction or credit.

The invested funds go into some type of investment vehicle, like mutual funds, and grow tax free. Some states have a total cap on the amount you can invest into a 529 savings plan, believe the total is around $500,000 USD.

The earnings from a 529 plan are tax deductible for everything related to your child`s future education, so, in the long run its smart planning assuming your kid`s going to go to a well known university in the US.