5 Ways Families Can Start Saving for College
Retirement plans and college saving plans are two of the most important activities for families looking to prevent financial disaster. With national student loan debt soaring and tuition rates continuing to rise, many parents are creating college savings accounts so that their children won’t have to be saddled with enormous amounts of student loan debt. Saving for college can be one of the best things you do for your children.
If you’re a parent considering saving for your children’s college funds, here are five things you should consider doing to reach your financial goals:
Start Saving for College Early On
To save enough funds to put your children through school, you will need to start as early as possible. Some parents start as soon as their child is born, while others leave it to the last minute and struggle to come up with the funds. Make it a priority to start saving as soon as you can, and continue to save whenever it’s possible. Extreme discipline is required, so be prepared to make some sacrifices along the way.
Research Financial Aid & Educational Benefits
Even if you’re able to save enough to cover your children’s entire college fees, make sure you still do plenty of research on financial aid and educational benefits that could help reduce the total cost of their education. Sports scholarships, federal pell grants and veterans education benefits should all be explored, as these can dramatically reduce your out of pocket costs. These programs allow you to get maximum value for your savings, and any money left over can be used for other important payments such as your children’s medical bills.
Open Up a Coverdell Education Savings Account (CESA)
A Coverdell Education Savings Account (CESA) is a type of college savings fund that allows you to contribute money any time throughout each taxable year. The fund allows the participant to put up to $2000 in a year and once the money is withdrawn it is entirely tax free. The tax benefits are one of the main benefits of this type of savings plan, as it allows the parent to use the entirety of the money to put towards their children’s education.
Set up a 529 College Plan
Another type of college savings plan is known as a 529 College Plan, which essentially allows you to partake in a savings plan or a prepaid plan. A savings plan allows you to gradually save toward your children’s education, and works similar to a 401K plan. A prepaid plan allows you to pay up front for your children’s entire education, usually for in-state state colleges (though sometimes funds can be converted to private and out-of-state colleges) at a fixed rate. Both plans have their pros and cons, but ultimately both offer effective solutions for financially preparing for your children’s college.
Make Personal Investments
Some parents choose to make personal investments rather than invest in a specific college savings plan. For example, parents may make investments in the stock market, in property or in personal possessions to help pay for their children’s education. Although some people may see this as risky, all investments have some level of risk, and personal investments that you directly control can be extremely lucrative.
There are many other ways of saving for college, but these are just a few the most effective tried and tested methods. Remember to plan in advance for your children’s education and thoroughly research all of your options before committing to any