If you're confused about how to save for a child's college education, I have some tips for you.
- Don't save a penny for education until you're saving everything you can for your own retirement. Each parent can do a Roth IRA up to $5,000. The money grows tax free and can be spent tax free. Contributions can be withdrawn tax free at any time, only the earnings have to stay in the account. That makes a Roth almost like an alternative way to pay for college if that becomes a higher priority in your life than building a suitable nest egg (not that I believe it should.)
- After you're saving everything you can for your own retirement, then you can do a state-sponsored 529 plan to save for your child's college. See my guide for my favorite state plans. (You are not limited by the state in which you live; you can contribute elsewhere.)
- With your 529 plan, go into an age-based portfolio where the risk level is automatically adjusted. The younger your child is, the more risk your money will take. The closer they get to college, the more conservative the portfolio becomes.
- Life insurance is not a smart way to save for college. Do not believe all the false advertising trying to convince you otherwise.