The Roth IRA will benefit you as withdrawals are tax-free as long as you have had the account for at least five years. Education IRAs can be helpful as well. The Hope Scholarship credit can be of some help also. State College Savings Plans can be rather lucrative toward affording a college education. These plans give you the opportunity to earn stock-market returns on college savings you do not need for several years.
Contributions grow tax-deferred until the money is taken out of the account to be used for college.
When withdrawn, the earnings are taxed at the student's tax rate, which is often much more beneficial than if it were taxed at the parents' tax rate. Penalties can be incurred if the money is not used for college. Through careful investing, you will be able to afford to pay for your child's future education by saving and collecting utilizing one or a mixture of the above financing strategies. Although the estimated costs for a 4-year education by the time your child reaches college age are extremely high, if you start early and take advantage of the time you have until that child is ready to leave the nest, you will be able to incur the costs that are not taken care of by financial aid, scholarships, grants and student loans.