Better.TV's Audra Lowe talks to Maribel Aber about ways to save for your children's college education.
How to Save for College Education Better Audra Lowe: There’s nothing that parents want more than to give your kids all the opportunity in the world especially providing them with a great education and college experience. Well that’s ideal but the cost of college might not be feasible for a lot of people. Better’s career and finance expert Maribel Aber is here to help explain some college saving plans that are going help all of us prepare for the scary future education cost. Welcome back Maribel. Maribel Aber: Great to be here. Audra: Scary as the word I think because parents know you’re supposed to be saving for your child’s education or you should be but its tough you got the monthly expenses going on and there’s day-to-day things that you need to save for it. Bottom line is most people aren’t saving enough right. Maribel: And where am I going to get it? Audra: Yeah. Maribel: I think I was looking at a Sally Mae and – came up with something same on average parents and families were saving maybe $3,000 each year and we know the cost are going up. Cost I mean I don’t know if you know this but that’s— Audra: Books and then room and board for a month. Maribel: Books, room and board. I think it was a college board except for the 2000 and 2009 school year that you know for an in state tuition for a public you know college $18,000 or more. If you’re out of state same school just on average just on $30,000 and forget about private schools. Audra: Right, right. Maribel: Private schools we’re talking about average of $37,000 so its a lot of money the good news is like you say some people are saving but the better news is that the more people hear about things like 529 plans the more money they’re going to be on for the way. Audra: Right okay so some people really then are on the right track to saving especially with the 529 you just mentioned. Can you walk u through the 529 people see it everywhere but how do you exactly configure to it what does it mean. Maribel: Absolutely you know my parents don’t know about the 529. You know I have talked to a couple of people like in studio we haven’t heard about the 529 really its just the internal revenue code 529 or people call it an education savings plan and all this issue contribute after tax dollars into the plan so its great you pay your patent tax up front. Audra: Okay. Maribel: So your contributions and then any of the earnings that you make that’s tax free okay so its allowed to compound right tax free. The parents are you, you control the funds so that’s another good thing but here’s the kicker if you know if your interest if your dividends you withdraw them for things that are not qualified higher education expenses then its taxable. Audra: Okay so you’re not tax on what you put in but you maybe tax on yearnings that you do take out so that aside from what you just said though can you withdraw any of the earnings at all with this thing hit by taxes or— Maribel: As long as it’s the qualified higher education expense and when I say that because the whole purpose of this plan is to be able to help fund for future college expenses. Audra: And what would be one of those expenses for example? Maribel: Tuition room and board books those kind of things but try to look at the plan carefully to make sure you’re not hit with those extra taxes. Audra: Right and then the 529 plans are they easy to find I mean and where do you go to look to get started. Maribel: So the two places that I would look thereof by the state or broker well the broker then you maybe hit with an annual distribution fee for the state you can just go online make sure you have all the beneficiary information and that kind of thing I would recommend going to sights like college savings.com or saving for college.org those are great sites to look at and the other thing is you can shop around. There are no age or residency requirements so one states plan might be better for you. They might have better options for you? Audra: Okay so that’s something we have to look out for but definitely on the website so I’ll explain to break it all down to you. Maribel: Absolutely. Audra: Good to have you back Maribel thank you so much explaining it all. An dif you guys got questions for Maribel you can always email her at AskMarible@BetterTV.com.