Financial News

Recently, CNNMoney.com asked Americans if they would be interested in helping to pay down the national debt, and the answer seemed to be a resounding "No!"

However, there is indeed a $12 trillion debt to pay down, and Uncle Sam is looking for Americans to make tax-deductible donations to help reduce it. Will you help?

U.S. Debt Donations: Not a New Concept

This may be the first time you've heard of making a donation to pay down the U.S. debt, but this is actually a nearly 50-year-old concept. Since 1961, Americans have been donating millions under the "gift to reduce the public debt" program.

In fact, the program has seen some of its biggest contributions in the past three years. And so far in 2009, the program has seen $3.1 million in total contributions - the largest in at least 10 years (the biggest total contribution year prior to 2009 was in 1994 when $2.4 million was donated).

You're Asking Me to Donate?

Of course, just because some people are donating doesn't mean everyone will. To prove this theory, CNNMoney.com recently took a team to New York's streets to see if anyone would take interest in donating to the fund. The answers the team received ranged from "They can use my tax dollars to do that and work it out," to "Hell no."

Not everyone is turned off by the idea of donating, however, which is probably why many people contribute regularly or even leave their estate to the fund when they die. If you are interested in donating, you could visit the Treasury Department's Bureau of Public Dept and check the FAQ section. Or you could find information on page 91 of the IRS' 2009 Instruction Booklet for Form 1040.

Just keep in mind that the amount donated each year is said by experts to not put a deep or lasting dent in the debt. In other ways, you may want to consider saving your own money for an uncertain future rather than help to pay down the national debt.

Would you give a donation to help pay down the U.S. Debt?

The 529 college savings plan that many parents have taken advantage of for years have seen a significant decrease in participation in 2008 and 2009. This comes from Financial Research Corp., a Boston research firm that has been keeping track of the amount parents have been setting aside over the past few years.

How the529 Savings Plan Works

The 529 savings plan has for many years been a successful vehicle for parents to save money for college for their children. To contribute, parents put after-tax dollars into an account that offers a variety of mutual funds and other investments.

Once the parent is ready to withdraw,their investment will be distributed tax-free as long as the funds are used for higher education. If the child decides not to go to college, the parent can only withdraw after paying taxes and penalties on the gains.

The Financial Research Corp. Report

The report from Financial Research Corp. shows that in recent years, contributions from parents have dropped considerably. Here are some stats from the report:

• In 2006, $15.5 billion put money into 529s
• By 2007, that number dropped to $15.2 billion
• 2008 saw a sharp drop in contributions to $5.2 billion
• So far, in 2009, only $4.8 billion in contributions have been made

The reason that the research firm suggest parents are dropping out has to do with the market crash of 2008. Many parents lost years worth of investments - or had a child not go to college and suffered penalties and taxes - and as a result chose to participate in safer savings options that allowed for more flexibility.

Other Ways to Help Your Children

Some parents have chosen to take on savings options like CDs, money market accounts, and even high-yield savings accounts to earn interest while having more flexibility in touching their money. Some have even purchased insurance annuities or treasury bonds. With interest rates currently so low for the 529 plan, some have even chosen to purchase cheap homes to help their children.

Of course, if you're looking for a way to pay for college and have run out of savings, you could always pursue the PLUS loan. But of course, before you make a choice, it's good to weigh all of your options (looking into cheaper schools, etc.) so that you can get your child the best education at the best price.

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