8 Ways to Save for Your Child’s Education
One of the most important goals for parents is to find a way to help pay for their child’s education. Though most parents cannot afford to pay the entire bill, on average parents will pay about one-third of the college costs. Given there may be more than one child, this task is further complicated.
As a parent the cost of saving for your child’s education may be a paramount goal and one that can feel nearly impossible to reach considering the cost of higher education. While it may seem overwhelming to even get started saving for higher education, America Saves is here with 9 steps to help you reach this goal, no matter the size.
- Start Early. The sooner you start saving the more time you have to build a solid fund for your children’s education. Some parents start saving for college soon after their child’s birth.
- Set a Goal: Decide how much you want to save and what type of education you want to provide for your child. Having a plan makes it 2x more likely that you will meet your goal. Use the America Saves Pledge to help create that plan.
- Open a 529 Savings Plan: A 529 plan is a tax-advantaged savings plan specifically designed for education expenses. The earnings are tax-free when used for qualified education expenses. Typically, these plans are invested for long-term growth to coincide with the year in which your child will begin using the funds.
- Use Automatic Savings: Set up automatic transfers from your checking account into a dedicated savings account or a 529 Plan (mentioned above). You can also use a split deposit with your directly deposited paycheck to make regular deposits into one of these savings vehicles every time you get paid. Automatic savings help you stay consistent with your plan.
- Consider a Prepaid Tuition Plan: Some states offer prepaid tuition plans that allow you to pay for your child’s tuition at today’s rates.
- Take Advantage of Employer Benefits: Some employers offer tuition reimbursement or other education benefits. These programs can help cover your child’s education costs.
- Invest in Stocks or Mutual Funds: Consider investing some of your savings in stocks or mutual funds to help grow your savings over time.
- Encourage Family Contributions: Ask grandparents and other family members to contribute to your child’s education fund instead of buying gifts for birthdays or holidays.
- Shop Around for Financial Aid: When it comes time for your child to attend college, be sure to explore financial aid options. There are many scholarships, grants, and other aid programs available that can help reduce the cost of education.
While the sooner you can start saving for your child’s education the less you will have to save each month, recognize that your situation will determine when you are able to start saving. Delaying when you start saving may mean you and/or your child will need to take out more money in loans or choose a less expensive school. These are your choices to make.
You can be confident in the choices you make today when you have done your research, consulted with professionals, examined your current financial situation, made some predictions for future saving opportunities, and recognize that as life unfolds you can adjust your plans.
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