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Building a college fund

January 29, 2014
By MOLLIE WARNER - Staff Writer , Times Leader

Getting prepared to send a child to college can seem daunting for any parent, but it's easier with tips from the experts.

Matt Padden, owner of Padden Financial Services in Wheeling, says a financial advisor can guide parents in the right direction.

"529s are a good route to go. When you make a contribution for your child or grandchild, depending on the state you'll get a tax deduction. The account will grow tax-free as long as you withdraw the funds for future college education and expenses," he said. "You can start them with a small amount of money and add to them at any time in the future."

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Padden Financial Services is located in the same building as Yourkovich & Associates, at 246 Kruger St., Elm Grove.

Section 529 Plans are named after the tax code that governs them. They operate in two ways: college savings plans or pre-paid tuition plans. Many universities have programs allowing payments to be installed over many years or in a lump sum prior to attending the school. Pre-paid tuition plans are advantageous because they lock in the current tuition price; participants will not be affected by any future rises in tuition. 529s are free from income limitations or age restrictions, meaning they can be started regardless of how much money a person makes or how old a beneficiary is.

529 Plans vary from state to state, and a financial advisor can help potential investors understand their situation and which plan is best for them.

Padden also advises parents to start saving as soon as possible for college. Even small amounts of money can build up to significant savings over time.

Also, keep in mind that colleges assess a family's financial need based on up to 5.64 percent of parents' available assets and on 20 percent of assets in a child's name. This means it's better to keep funds in a parent's name, even though children's income is generally taxed at a lower rate.

Most importantly, when it comes time for a child to head off to higher education, look for scholarships. Even scholarships in smaller amounts can be beneficial and should not be overlooked. It's literally free money, usually awarded for something students have already accomplished, and all they have to do is apply. School guidance counselors are often the best source on scholarship information, and they can help students find scholarships that apply to them. Government grants are also great, because unlike loans, they don't have to be paid back. Many people qualify for Federal Pell Grants, and filling out the Free Application for Federal Student Aid (FAFSA) automatically applies any student heading to college.

Warner may be reached at



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