Healthy Living

Tips for Saving for Your Kid’s College Education

When money is tight it becomes more important than ever to have a plan in place to save for a child’s college education. There are a variety of ways to save for their university years and it might take a combination of these strategies to pay for it all.

Get started early

College may always seem like it’s a long way off but the time will be here soon. When trying to save money to pay for college expenses it makes sense to get started as soon as possible. This will give whichever savings account is used time to accumulate the maximum amount of money. A good first step is to discuss possible options with a financial advisor. Some of those options include:

*A 529 – Most states offer these education savings programs which provide a variety of benefits, the biggest of which is that withdrawals are tax-free if used for educational purposes. While the account is managed by an investment specialist, the beneficiary retains overall control. Keeping this in mind, when the children are very young the portfolio should invest more heavily in stocks, which will have some risk but will also provide larger returns. As the child gets closer to high school age, the portfolio should switch to bonds, which are safer and will help maintain the account that has accrued.

*Pre-paid plans – Another 529 option is the prepaid tuition plan offered by some state schools. This allows parents to pay for a future tuition using today’s prices. The plan is essentially a contract between the plan’s beneficiary and a list of participating schools in which a contribution amount is agreed upon and when it comes time for college, the institution agrees the child’s tuition is already paid.

More options

Saving likely will not be the only way to pay for college. Most parents and their children will also need some form of financial aid or alternative form of funding to pay the rest of the bill.

*Scholarships – Many civic organizations make them available to students and some are available for academic achievements. Have the student check with their guidance counselor or conduct an Internet search to see which ones the child may be qualified to receive.

*Loans – Low-interest loans can be provided to students and some parents. The payments won’t need to be made until after college graduation.

*Grants – Usually based on financial need, grants are better than loans because the funds do not need to be paid back. The most common program is the federal Pell Grant.

*Home equity – Using the value built up in a home over time, a person can open a home equity line of credit with a bank (also known as a HELOC). The account provides checks which can be written for various expenses, including tuition. The interest can be tax deductible.

When money is tight saving for a college education may require more than one strategy. By combining savings, financial aid and other sources, a child’s educational future can be secured.

This is a guest post from Katherine Watkins, who writes for a website that offers advice about opening a HELOC. She thinks it’s important for parents to put a plan in place to cover the costs of their child’s education, even when the household budget is stretched. It is worth speaking to a financial advisor to find out the best options.

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Karla Urwitz

As a full-time career oriented mother of one, I love all things travel. I was in the hospitality business for 15 years and loved it. So why not become a travel agent. So I am trying to find my balance in life through being a parent to a teenager, my love of travel, and living the best life possible. Come join me on this bumpy journey of life.

One thought on “Tips for Saving for Your Kid’s College Education

  1. Never too early to start saving for something as important as education! We just switched states, so I will have to check into the 529 option here. Thanks for the info.

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