A parent's responsibility does not end on just providing the basic needs of his/her child. Education is one of the most important aspects in a person's life for it is the tool to gain knowledge and a gateway to success. There are options to save money and gather enough funds for college, but ultimately there is only one best education IRA to suit one's needs and financial capacity.
To most people, saving money in the bank is one way to start funding for a child's college education. Other folks turn to other forms of IRA such as Roth IRA, to finance their children's college finances. For the more desperate, their 401k is the last resort and the only best option if they do not have enough funds.
But it all boils down to one thing: money. For every option there is always a specific amount of money involved. The amount varies depending on the type of savings you will be choosing.
The more common education IRA which is prior to the Economic Growth and Tax Relief Reconciliation Act of 2001 only allows parents a maximum yearly contribution of $ 500. But the provisions under the EGTRRA, the amount changed to $ 2,000 per year for every child. This is now known as the Coverdell ESA.
Under the new and improved one, parents can save more especially if they start early. Financial planners and advisers encourage parents to save college funds through education IRA to save on taxes and to have an advantage of paying less during their child's college years.
Specifically, the new and improved version of education IRA could be the best education IRA there is. Though the financial obligation is a huge factor to discourage some families, but the ease in paying for college will be greater than just saving money on a regular bank account. It is safe to say that this improved version can replace all the other options available.
The best time to open for an education IRA is when your child is still young and the household expenses are still low. If you have a big family, chances are you will be drained of paying for education IRAs and other expenses. Timing, number of kids and incoming money are the most important factors that can make or break your best education IRA option. Whether it is Coverdell ESA or anything else, it is important that you look at the three important factors so you can weigh your options and you can plan for the payment strategies.
Of course, you can always ask for your family's help when it comes to paying for your best education IRA option. But as always, consider the three factors. It may not be enough that you have uncles, aunts, grandparents and yourself to pay for the education IRA for five kids. And always check your paying capacity based on your incoming net salary.