As a parent, the big financial concern with a newborn is how to set aside enough money to assist for a college education. Universities and state governments have developed many different financial savings plans to encourage parents to save money for college. Some of the plans include 529 accounts, Coverdell accounts, Roth IRAs and prepaid/guaranteed tuition costs. Unfortunately, few of the programs offer every benefit such as tax deductions, tax deferred savings, unlimited investment options, self directed investments and no penalties.
Selecting a university is a critical and expensive decision, and in my view it is foolhardy to make before the last couple years of high school. A drawback of the university-based or state-based plans (such as a 529 account) is that they impose penalties if a child doesnt attend a specific university or in a specific state. Who knows what aptitudes, skills or interests your child may develop that necessitate a specific school that is out of your home state. University and state-based plans also impose penalties if the money isnt ultimately used for qualified college expenses; another example where an event that is out of your control and...
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