Many parents believe that once their child enters college that it is too large to fund a college savings program. This is partially true. Even if you are paying college expenses out of pocket, you should still consider opening and funding a 529 plan.

The intent is not to accumulate a large balance for future college expenses, but to take advantage of the tax deduction offered by the various states. For example, Kansas allows a dollar-for-dollar deduction of up to $6,000 per child from your Kansas taxable income for contributions to a qualified 529-college program.

If the Kansas income tax rate is say 6%, then contributing $6,000 into the program would save you $360/year in Kansas state income taxes.

But what about market fluctuation, and the need to pay the tuition now and not in future years?

Simple, just deposit the funds into the money market option inside the 529 program, and a month later withdraw it to pay college expenses. You are able to use the funds for current college expenses, not be subject to any market risk and claim a deduction from your Kansas taxable income. Missouri residents have a similar state income deductions option, only it is limited to $8,000 per parent with a maximum deduction of $16,000 per couple.

The following information and quotes were extracted from the April 30, 2009 Wall Street Journal:

• Chrysler filed for Chapter 11 bankruptcy protection today, kicking off what the Obama administration predicts will be a 30- to 60-day restructuring of the third-largest U.S. auto maker. At the same time, it entered into a partnership with Italian auto maker Fiat SpA. I don’t like to see a large U.S. company go into bankruptcy; however, it is necessary. Hopefully, a leaner and more competitive car company will emerge. Unfortunately, Chrysler stock and bond holders will get the short-end of this stick.
• The U.S. Labor Department reported this week that new applications for unemployment declined last week. In addition, companies drew down inventories at the fastest pace since the start of the decade. This is due to a huge contraction in consumer spending and companies dramatically lowering production in response. However, now that inventories are down, it could lead manufacturers to ramp up production as consumer spending stabilizes or even improves.“We think we’re moving toward stabilization in the economy,” said Joseph Brusuelas of Moody’s Economy.com. “We expect to be at a point later this year where firms will feel much more comfortable taking risks and cautiously rebuilding stocks.”“There was a modest upgrade to the economic outlook, and (confirmation) that consumer spending is stabilizing,” said Sean Simko, head of fixed-income management at SEI Investments.
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