{Editor’s Note:  Our recent “Healthy Habits” series has inspired one of our readers, Brenda Lyttle, to share a couple of money saving tips.  Brenda is a stay at home mom and a lover of the frugal life.  A brief disclaimer, we do not offer individual tax advice and encourage you to speak with a qualified tax professional to determine whether or not these tips are right for you.}

Are you losing sleep planning for your child’s college education?  You are not alone in living in fear that you may not be able to finance your child’s college education.  You may even have earned some bad credit scores, but if you’re determined and plan early, you can still pull it off.

You will need articulate planning in order to successfully fund you kid’s college education during these times when the college fees are rising exponentially.  Here are two tips to help you get started:

1.      Choose the Right Tax Saving Schemes

Why not save on some tax payments while planning to fund your child’s college education all at the same time?  There are numerous plans available in the market which offer a tax shelter if you decide to invest with them.  Here are two of the most popular and rewarding ones:

a.    529 Plans

You can invest with these plans while not needing to pay tax on the invested amount.  You can then withdraw the investment for paying tuition fees when your child enters college and the amount will still remain untaxed upon withdrawal!  This plan offers its tax saving options to all accrued earnings which are used for qualified educational expenses. You will be exempted from all the federal taxes.

You will be required to pay the state taxes, however, though some of the states are known to waiver a part of the state taxes if you invest your earnings in the 529 plans.  You can also use the 529 plans to prepay the tuition fees at your preferred college at the present, presumably lower, tuition rates.  This way you are saving on taxes today and protecting yourself from inflated college fees tomorrow.

b.      Coverdell Education Savings Accounts

This account is not as popular as the 529 plans but has seen some popularity owing to the fact that your contribution limit is determined by your gross income which is adjusted to future rates.  The contributions in this account are non-deductible and will be allowed to grow tax-free.  You can’t use the funds of this account for any other purpose apart from an education from a qualified educational institution.

2.      Let Them Handle Their Own College Expenses

Have you considered leaving portions of the college expenses to your child in order to save some money from the educational fund to be used for your own future?  If you haven’t, it is high time you start doing so!  Remember that your child has numerous options for financing his college education irrespective of whether or not you have a college education fund set up for them.

There are numerous grants, scholarships and fellowship programs that colleges offer in order to help students finance their college expenses.  In case your child fails to secure one of these, they can always apply for an educational loan.  The burden of repayment of this loan will rest on their shoulders when they secure a job.  If you are still willing to help them out with their educational expenses, you can do so by paying a part of the college fees from your current income flow at that point of time.

Remember that planning for your child’s college expenses is important.  It should be considered as important as securing your retirement and, using these tips, you may enjoy some tax savings in the process!

Brenda Lyttle is a work-at-home mom and lover of frugal living.  She suggests that to save money on occasions, you may want to indulge in off-season shopping, such as buying Halloween costumes for 2012 around May or June to get a bargain, instead of waiting until October.