Today Money financial expert Sharon Epperson joined us for a live Web chat Wednesday to answer your questions.
Here’s one of her answers to questions from the live chat. (See below for the full Q&A and video of Sharon’s TV appearance this morning.)
“I just had a baby (4 months). I want to start saving money for him but not exactly sure of the best place to save. I was thinking about the 529 savings plan but I wasn't sure if it HAD to be used for college. Of course I'd like him to go to college, but what if he doesn't. What happens to that money?”
“You are so smart to start saving for his education NOW. 529 college savings plans are great ways to force you to save for college - but you must use those funds for qualified higher education expenses or pay a penalty fee when you withdraw the money. It's like a 401k or IRA in the sense that you can take the money out without penalty if it's used for its intended purpose - otherwise you pay a penalty. The good news is that even if your child does not go to college, the money can go to another beneficiary -- you, another child, family member, friend, anyone. If you're not sure if your child will go to college, hedge your bets. Put some money in the 529 plan and some in a Roth IRA. You can use the Roth IRA for your own retirement or use the contributions you've made to the Roth college if needed. Actually, Roth contributions can be taken out at any time TAX-FREE, making them another great way to save.”
Here’s the full chat archive and Sharon’s TV appearance:
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