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Multiples and money part 1: saving for college

You can help your kids afford college, even if you have a large family
You can help your kids afford college, even if you have a large family
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Disclaimer: these articles are not intended as financial advice, but rather as a list of resources.  If you aren't sure which option is best for your family, ask a professional financial advisor.

So, we've established that you have a large family.  Now, how are you going to afford it?  Over the next couple of weeks, we'll deal with a couple of money matters to help answer that question.  First up: how to save money for your kids' college educations.

One (relatively) simple way to do this is to open a 529 plan.  These are accounts administered by educational institutes and/or state governments that allow you to set aside money dedicated to educational expenses.  There are two kinds of 529s: prepaid and savings.

Prepaid accounts allow you to pay towards future college costs at today's rates.  This can save your family a lot of money, but it can also limit your child's choices -- most plans designate funds for a specific institution.  Click here for a good summary of the pros and cons of prepaid plans.

Savings accounts are investment vehicles that generally allow you to use your money to pay for any qualifying educational costs.  They are potentially riskier than prepaid plans; profits are not guaranteed.  Here is the summary for this kind of plan.  (Minnesota's 529 plan is a savings plan.  For an at-a-glance summary, check out bankrate.com.)

All 529s come with federal tax breaks.  There are also state tax benefits for Minnesota residents investing in Minnesota's plan (and other states offer similar deals to their own residents).  However, you can choose to invest in another state's plan.  Each plan is run by a different investment manager, so it's possible that you could get a higher return on your investment in another state's 529 -- maybe even high enough to justify sacrificing the tax break.  (Any manager should provide information about past performance to potential investors to help you gauge their successfulness.)

Fortunately, there are many resources available so parents can educate themselves about the options.  Morningstar's list of the best and worst 529 plans is very thorough.  Savingforcollege.com lets you compare plans side-by-side.  And, if you are still bewildered by the choices, you can seek advice from a professional.

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