Parents preparing for a newborn have to make many preparations for their new arrival. They need to get the crib and nursery ready, make sure they have plenty of clothes and diapers on hand, and some forward-thinking parents are even setting up a college funding plan for their newborn.

While this may seem extreme, the fact is that it is never too early to start thinking about a child’s educational future. College costs have consistently climbed in the last 10 years, and there is little reason to expect the trend will level off in the near future. In fact, economists estimate that collegiate expenses will climb at a rate of five percent annually; meaning that by the year 2022, a year at a private college, including tuition, room and board could cost $69,940.

As startling as this figure is, the earlier parents start saving for these costs, the easier affording college will be.

One reliable way to save money for a child’s education is through an Education and Savings Bond. These bonds, called series EE and I Bonds, not only allow parents to earn interest on their investment, but enables qualifying parents to exclude the interest income from their taxes when the bond is redeemed.

To make the most of this program, parents must fulfill several criteria:

Parent’s Eligibility: The parent must be 24 years or older, and the bond must be in the name of either or both of the parents, not in the child’s name. (However, the child can be named as a beneficiary.) If the qualifying parent is married, they must file a joint tax return.

Eligible Institutions: Most post-secondary institutions such as colleges, universities and vocational schools must meet certain federal assistance standards. (As a general rule, institutions that qualify for the guaranteed student loan program will also qualify for the bond program.)

Qualified expenses: Only expenses such as tuition and lab fees are eligible under the program. Books, room and board and other living expenses do not qualify.

If the student receives scholarships, fellowships, or employer-provided tuition assistance, the qualifying expenses are deducted by that amount.

All of the qualifying expenses must be incurred during the same tax year the bond is redeemed. The interest earrings are tax deductible only if the entire bond including the principal and the interest earnings. If only 80% of the redeemed bond was used on educational expenses, then only 80% of the interest can be deducted.

Income limitations: This interest deduction is only available taxpayers whose modified adjusted gross income (MAGI) falls below certain levels. For example, in 2006, for a couple filing jointly the deduction is reduced when the MAGI reaches $94,700 and is eliminated at $124,700.

For parents starting a college education fund for their children, Education and Savings Bonds could be an effective way to start.

By David Plowman

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Need a way to pay off credit card debt, pay for home improvements, or wedding? If you need cash for whatever reason, a home equity loan may be the answer.

These loans are based on the amount of equity, or the difference between the value of your home and the amount you owe, you have in your home. Many packages enable you to borrow up to 70 to 90 percent of your equity.

Compared to mortgages, home equity loans generally offer lower interest rates, and are a “hot product” offered by several competing banks and lending institutions. Shop around to make sure you are getting the best deal.

When shopping for a home equity loan, be aware of the following:

• Many institutions will offer low “teaser rates” for the first year of the loan. Make sure you calculate the interest rate for the full term of the loan.
• Include any fees the lender may tack on to the loan.
• Remember, the loan with the lowest monthly payment may not be the least expensive one.
• Know how many payments you will need to make, the total amount you are borrowing, and the total amount you are repaying.

By comparing different loan quotes and doing your homework before you sign an application, you will be better informed and will be more likely to get the best deal on a home equity loan.

By David Plowman

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By David Plowman

Buying a home is a tremendous investment. You will be able to receive tax breaks, and if home values continue to appreciate, you will likely make a profit if you re-sell your home down the road.

But you don’t need to sell your home in order to take advantage of its value. In fact, there are several options, including re-financing, home equity loans, home equity credit lines, debt consolidation and reverse mortgages.

Below is a brief description of these loans:

• Home Equity Loan: Many people take out these types of loans to make renovations on their home, consolidate debts, pay off medical bills, or even to help send children to college. Whatever the purpose, these loans work in much the same way. They borrow against the equity in your home (the difference between your home’s current value and the money you owe on it).

You will receive the loan amount in one lump sum, and will pay the balance, interest and other fees over a specified time.

• Home Equity Line: This works in much the same way as a home equity loan, However, rather than receive a lump sum payment, you are issued blank checks which you write as needed (up to a pre-approved amount.) Your loan balance is for only the amount of the checks you’ve written, plus interest and fees. This may be preferable to a lump sum payment if you don’t know the exact amount you will need to borrow, or if you will be completing a project where you will be making payments over time.

The advantage to these loans is the interest rate is generally much lower than other lines of credit such as credit cards, and the interest paid is usually tax deductible.

Remember a Home Equity Loan or a Home Equity Line is not a source of “free money” Like any other type of loan, it must be repaid. Failure to repay these loans could result in foreclosure of your home. However, if used wisely, these home equity loans can be a tremendous way to tap into your home’s value.

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