Save for college using 529 and ESA accounts and take advantage of their tax treatment
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It’s a nice problem to have: having to find out where to stash all your extra cash. But it is an issue that will come up once you are debt free. Today’s topic is about where to put your different savings accounts. The question for today came from someone who listened to the replay of the “You are Debt Free . . . Now What?” Teleseminar.
You want to keep your emergency, vacation, car, and other savings account(s) separate from your general account so that way you know how much money you have in savings. For anything that you are planning to use in less than three years, I recommend using a simple savings account. Yes, you won’t make very much interest, but the money will be there when you need it and you don’t have to worry about it being tied up in stocks.
Should you have a separate savings account for each thing you are saving for? You can and I would recommend you keep you emergency savings account separate, but keeping your other savings separate is up to you. I personally use the non-monthly and savings worksheet to help keep track of our savings accounts.
In addition, for college savings use either an ESA or a 529 plan. Those plans have special tax advantages over investing them yourself. For more information, check out the video I did for Financial Literacy Month on college savings or check out the podcast I did explaining ESA and 529 plans.
In addition, if you interested in listening to books I highly recommend you check out audible.com and sign up for their free 30 day trial. My wife and I have really enjoyed what audible offers and you can actually get a free audio book by signing up.
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