• In this changing economy, more families find their financial resources are limited. The short-term needs overwhelm people and they forget about their long-term financial needs. Here are some tips that will help families make wise money decisions and reap potential tax benefits in the process.
  
  

College--Start Small

• Families with children may be thinking about soccer uniforms and band instruments right now. College will come up quickly along with textbooks and tuition costs. As college costs continue to rise, families will need additional resources to help pay for higher education for their children. Families can start by investing small amounts of money today that will grow through the years and help ease the financial burden of that college. There are several options for families to take advantage of right now. 529 accounts allow money to grow tax deferred until it is withdrawn. When the money is withdrawn for college expenses, the money and its earnings are tax free. These plans are sponsored by individual states and can be transferred from one beneficiary to another. Families can contribute a small amount on a monthly basis or a larger lump sum, depending on their financial situation. Families can contribute $2,000 annually to a Coverdell Education Savings Account. These accounts allow earnings to grow tax deferred. When the money is withdrawn for college expenses, the distribution is tax free. U.S. Savings Bonds may be purchased in small increments at any time. If the proceeds are used to pay for college expenses, the distribution will be tax free.
  
  

Retirement--Pay Yourself First

• While retirement may seem far away into the future, the time will pass quickly. Retirement income can consist of any social security benefits, company pension and the proceeds from retirement investments. Since more companies are discontinuing pensions and social security benefits are minimal, individuals need to plan their retirement investments while they are working. Money should be invested for retirement from every paycheck before paying any other bills. If the employer sponsors a 401K plan, the individual should take advantage of it. Some companies match employee contributions, which amounts to free money for the employee. Contributions are also tax deductible. If the company does not sponsor a 401K, the individual can open an Individual Retirement Account or IRA. Contributions to an IRA are also tax deductible.
  
  

Estate Planning--Do It Now

• Planning for the division of your assets may seem awkward or uncomfortable, but it is the only way to ensure that your wishes will be followed after you die. This is especially important if you have dependents that will need the proper financial care when you are no longer here to do it. Estate planning includes drawing up a will and determining who will make decisions if you are incapacitated. Creating a will means that your assets will be distributed in the manner that you choose. It also means that your dependents will be taken care of in the manner that you prescribe.