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Question for the Money Doctors

Question submitted on Jan 27, 2011.

Question

My husband and I have two girls, one is turning eight and our little one six and half.We both have life insurance and we would like to have an insurance for their college, what is the best way to save for college.
Thank you.

Answer

There are several good ways to save for college.  Taxpayers can contribute $2,000 per year to Coverdell Education Savings Accounts, formerly education IRAs.  The earnings can be withdrawn tax free if used for qualified education expenses.

Section 529 Plan allow for larger contributions and again the earnings can be withdrawn tax free if used for qualified education expenses.


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