As they make their way through school, things will be very different for today’s students than they were for their parents. These days, instead of overhead projectors and chalkboards, lessons are being taught on computers. And that’s not all that has changed.

Because of budget constraints, many schools have cut enrichment classes such as art, music and physical education. In fact, many are turning to parents to help pay for field trips, athletic uniforms and basic learning tools such as pencils, paper, markers, chalk and glue.

Think education is expensive now? According to the College Board, a not-for-profit membership association whose mission is to connect students to college success and opportunity, the average cost for tuition and fees at four-year public institutions has increased nearly 51 percent over the last 10 years (after adjusting for inflation), and these costs will almost certainly continue to rise. While the cost of college has skyrocketed, families are not saving enough. The good news is that every little contribution helps and parents should know there are some simple steps they can take now to jumpstart their child’s college savings for the future:

1) Consider a tax-free 529 savings account and start contributing to it regularly. If you deposit just $50 into the account every month, at the end of the year you’ll have built up $600 in principal. Add in gift checks from grandparents and part of any bonuses you may receive at work and you could be putting away a couple thousand dollars a year. Investment earnings could boost that number even higher. The great thing about 529 accounts is they are tax-advantaged and anyone can open one.

2) Encourage your child to take part in saving for college by putting a portion of his or her allowance in a piggy bank. At the end of the year, they can add up their savings and deposit it into a special bank account. When the time comes for college, the money they have saved can go towards the extras they want for school.

3) Become a Upromise member and begin earning college savings rewards with online purchases from hundreds of retailers as well as on purchases at grocery and drug stores, gas stations and even restaurants.

“Since 2001, Upromise has been dedicated to helping families get started saving for college. We now have 8 million members and hundreds of top retail brands partnering with us in this mission to help make college more affordable,” says David Rochon, president, Upromise.

The latest addition to Upromise, the Upromise Schools Program, helps families save more for college and at the same time helps raise much needed funds for schools. So far, more than 9,000 schools across the country are registered with the Upromise Schools Program.

“The Upromise Schools Program is a no brainer. There is not another fundraiser out there that doesn’t cost any money, puts money into parents’ pockets, and makes money for the school. It’s a win — win — win all the way around,” says Angie O’Farrell, parent volunteer, Level Creek Elementary, Suwanee, Georgia.

To sign up for a free membership and start saving today, log on to www.upromise.com.

Courtesy of ARAcontent

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Parents should take full advantage of the fact that their child can receive up to $850 in investment income every year without paying federal income taxes.  By gifting income-generating assets into a UTMA account or gifting appreciated assets later, parents can effectively shift their income and capital gains out of their higher tax bracket.  Any assets gifted to your children are theirs to control once they reach a certain age under state law.   A student’s assets and income are counted more heavily under financial aid formulas.  It’s wise to consult with a tax advisor before making any tax-related decisions to verify that you’re able to count this income. 

Qualified state tuition programs help enable participants to contribute to an account, which is established to pay future college expenses for a beneficiary.  These programs allow participants to invest and take advantage of recently enacted Federal and state tax breaks.  Forty states and the District of Columbia offer qualified state tuition programs and are competing for the program dollars.  All Federal tax on investment earnings are deterred until the money is withdrawn and then the earnings are taxed at the beneficiary’s rate.  Participants in this program never pay state tax on earnings in their state’s plan and certain states allow residents to deduct contributions from their adjusted gross income when calculating their state income tax.  Having a qualified state tuition program will likely lessen the aid one could get and are best suited for people who do not expect to receive much financial aid.

The Section 529 College Savings Plan is a state-sponsored college savings program, which allows individuals to accumulate tax-advantaged funds for financing college expenses for a beneficiary.  Unlike gifting accounts and Coverdell Education Savings Accounts, 529 College Savings Plan assets are currently attributed to the account owner, not the student, and helps lower the impact on financial aid.  The 529 College Savings Plan offers tax-deferred growth, tax-free qualified distributions, higher contribution limits, no income of age restrictions, and greater control for the account owner. The 529 College Savings Plan assets may be used to pay for qualified education expenses at almost any college or post-secondary programs in the United States or select foreign institutes.  The qualified expenses under the 529 College Savings Plan include tuition, room and board, books, fees, supplies, and equipment including a computer.  This plan is limited to undergraduate and graduate tuition and expenses only and cannot be used for private elementary or high school tuition.

Parents, grandparents, other family members, or friends may establish a 529 College Savings Plan or the students may establish the plan for themselves.  There are no age or income restrictions, making this plan quite beneficial.  The maximum contributions vary by plan and you may utilize as much as $55,000 in any five-year period without exceeding your federal gift tax exclusion. Another option is available to roll over or transfer assets from any gifting or qualified savings plan to a 529 College Savings Plan.  The 529 College Savings Plan offers a number of tax benefits also.  Both your contributions and earnings grow tax-deferred and no Federal taxes need to be paid when funds are withdrawn to pay for qualified expenses.  Exemption on earnings from state taxes is determined by the individual state.  In most cases, both your contributions and earnings are not considered part of your taxable estate.  When investing in a 529 College Savings Plan, your earnings will not be assessed Federal or state taxes, which allows your assets to accumulate without paying taxes on capital gains, dividends, or interest. 

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