Ok to give a rough break down.. Currently I'm at my employers match for my 401K (5% fidelity) and I'm already contributing to my Roth IRA as well. I'm searching for a good method to earn intreast on funds that I've been saving for my kids education. Currently I contribute about $2,000 per kid per year (2 kids). I want to get the max growth for the next 10- 15 years, so my kids can have the best possible start with their education. The majority of the money that I contribute is the child tax credit I receive for my kids.

What are your recommendations in savings for education on a short term basis? I know there's programs out there, but I'm just not fully aware of all the options that are available. Eventually I will increase my controbutions for their education, once my 6 month savings plan is accomplished and I can max out my IRA.

Lastly, what are some sound investment vehicles for savings? Once all my goals are outlined, I would like to invest some savings (aside from 6 month emergency fund, 401K and IRA). Just leaving it in the bank to gain intreast just isn't enough.. CD's, mutual funds???

thanks in advance...:cheers

With that amount of money yearly, an "Education IRA" or "Educational Savings Account - ESA", or "Coverdell ESA" would be a good way to go. They are tax free - growth and principal - when used for "qualified" educational expenses. This is not very limiting - tuition, room, board, books, fees all qualify.

The advantage of an ESA is that they investment choices are not limited by the boundaries of the plan as are the choices in a 529 plan. So you and a financial planner can sit down and pick mutual funds to invest in, then wrap the tax-protective coating called "ESA" around them without constraints of your choices.

The down side of ESAs is that the yearly contribution limits are relatively low - $2000. But that may work out OK for you.

www.savingforcollege.com

Lot's of good information here, but they are a little too enthusiastic about 529 plans without distinguishing the good ones from the bad ones, and there are way too many bad ones.

I have read some stuff recently on education savings plans. I am not extremely knowledgeable, but one point seem to stick out to me about education savings plans and 529 plans.

Some of the materials I read (and these might be dated) commented on the fact that if you are looking to obtain financial aid when your kids go to college, do not do 2 things:

1. Never put any funds in your child's name. Children are expected to contributed 35% of their net worth vs. 6% of a parents. This means that when you fill out the FAFSA and they ask you for your assets, $1000 in your name only looks like $60 to them as oppose to $350 worth of assets in your child's name.

2. They were not sure if the FAFSA was going to consider 529 plans and ESA's as assets. Roth IRA's and other retirement accounts are not considered assets on the FAFSA form. I am not saying to invest your child's money in a Roth, but there may be other forms of investments that are not considered assets when completing the FAFSA.

Again, these only apply to help keep recordable asset levels low so you can try to obtain more financial aid.

Don't bother with the kids education savings. Why? Because if they don't go to college, you're screwed. PUt the additional money into an IRA or Roth IRA. You can make withdrawals for it (without penalty) to pay for kids college expenses.

Then, if they don't go to college, or heaven forbid, they don' live that long, you have the money available to you at retirement.