3 Tips For Saving For Your Kids’ College Fund
There’s a reason you often hear parents saying “They grow up so fast.” It can sometimes feel like your child goes from a toddler to a college student in the blink of an eye. When you’re having a baby, the last thing you want to think about is saving for your child’s college, but it truly is smartest to save as early as possible.
Thanks to the phenomenon of compounding, in which your turns earn more returns, your money can grow exponentially if you start saving early. Try to give your money as much time to grow as possible. If you start saving for college before your child is born, you’ll be able to save much more than if you wait 9 years. Here are a few tips for saving up for your kid’s college.
Plan for retirement, too.
Before you start saving, make sure you’re taking your retirement plans into account as well. Many experts feel that equal if not greater importance should be placed on your retirement plans. Paying for college can be done through other options such as scholarships, grants and loan programs, but your options without any retirement savings are limited. You can either continue to work to get by on small social security payments. If you put your kids through college without planning for retirement, this could become a burden on them when your retirement savings run out later. Planning for retirement doesn’t just help you. It can also save your children financial strain in the future.
Choose the right savings plan.
When it comes to choosing a savings plan you have a few options. In most states, there are 529 savings plans that come with tax benefits. These benefits are especially helpful in states that have an income tax. If you won’t need access to your child’s college fund until you are older than 59 and a half, then you can consider an IRA. This is beneficial if you want higher interest rates than the average 529 or savings account. If you’d prefer to use a standard savings account, you can set up the amount in your child’s name, but there’s a catch. Having too much money in child’s name could have a negative effect on his or her eligibility for financial aid in the future.
Remember that the investment is worth it.
College is getting more and more expensive, but it pays off. The U.S. Census Bureau states that education has a greater impact on earnings throughout a 40-year career than any other other factor. A study conducted by the Census Bureau examined the relationship between education and earnings using data collected monthly from 2006 to 2008. The study’s author estimated that a person with a professional degree earns about $72,000 more a year than a person with an eighth-grade education. Saving for your kid’s college is well worth it, because that degree could help your child make more money in the future.
It’s crucial that you start saving for your childrens’ college as early as possible. The earlier you start saving the more time your savings will have to grow. Saving for college can have a huge impact not only on your child’s education but on your child’s life way down the line.