No matter what the child’s age, strategies are available to help you
come up with the necessary funds. For young children, start putting
money away regularly now, investing in higher-potential-growth securities
and mutual funds as you would for other long-term goals, such as retirement.
As your income increases, try to increase the amount you’re investing.
When a child reaches high school age, you’ll probably want to begin
moving college investments into lesser-risk investments. At this point,
if you own appreciated assets that you intend to sell to meet college
expenses, consider giving them to the child, and letting the child sell
them. The advantage? Potentially more after-tax money to meet expenses.
If you are eligible, you may want to consider using an Education IRA
to help you save for your children or grandchildren’s higher education.
The Education IRA lets you contribute toward a child’s future education
expenses until the child turns age 18. Your contributions and the account
earnings generally can be withdrawn from the IRA tax free to pay qualifying
education expenses of the child.