If you have kids, you’ve undoubtedly read some of the articles or listened to news reports about the skyrocketing costs of college. The figures are shocking to say the least. Parents used to realistically be able to plan ahead in order to put their kids through college so that their children would not be burdened with hefty school loans after graduation. Now, it seems, the dream has faded – not to mention any hopes of actually achieving the dream.

Based on recent reports, some private four-year institutions charge a total of $33,000 a year or more! If you do the math – and you’re still conscious – that amounts to a whopping $132,000 per child. If you have two children, you’d have to dig deep into your pockets for $264,000. Rack that up – along with the cost for the extra year or two that it might actually take your child to complete a supposed four-year degree – and paying for your child’s college might seem far from reach.

So if your kids are young – or if they’re just a mere twinkle in your eye – you might want to consider some options now to help you save for such a large expenditure in the future. By the way — did we mention that those costs don’t even include books, food expenses, a car, gas or other incidentals that your kids might need?

A great way to start saving for your children’s education is to open a Coverdell Education Savings Account (CESA). This is a great option – especially because funds that are put into the account are tax-free. If one of your children decides college is not for him or her, you can transfer the account to another family member – a more academically inclined child. Since the account is really for your children, you also can use the funds for any eligible elementary or secondary school, be it a public, private or religious institution.

CESA guidelines are outlined in IRS Publication 970, or you can talk with your financial planner or tax professional to find out how a CESA can benefit your family.

Filed under: CESA on December 1st, 2008