Since we were old enough to attend school, maybe even earlier for some of us, we’ve heard about the importance of an education, and that college was a must in order to secure our financial futures. However, not all of our parents were able to make the necessary sacrifices in order to have a college fund waiting for us when the time arrived. If you have decided to make it a point to have the security waiting on your child, no matter how hard it may seem, we have a few tips to help get you started.
529 Plans
In case you didn’t know, a 529 plan operates similarly to IRA and 401(k) plans. These plans allow parents to save for their child’s education tax-free through an assortment of investment options. Almost every state offers their own 529 plan. However, you are able to put your money into the plan of any state you choose. These plans can also differ state to state so it is important to do some research and find out which plan will work best for you.
UTMA and UGMA accounts
These accounts operate as more of a trust for your child. For example, if you have assets such as stocks or bonds that you’d like to save especially for your kids then you are able to put them into one of these custodial accounts. One of the drawbacks of these accounts is that when it comes to financial aid, the college will consider this when deciding how much to give your child. If you have a lot of saved in either an UTMA or UGMA then the school may choose not to give you much. Also, once your child researches 18 or 21 (depending on the state) the control of the account will go to them. This means that should your child decide to spend these funds on something other than college you won’t be able to stop them.
Lower the Costs
Don’t get so caught up in trying to plan for the future as soon as you find out you’re expecting that you leave your current self in debt. Keep in mind that there are plenty of scholarships, student loans, and the Free Application for Federal State Aid (FAFSA) that are all going to be there to help your child pay for college. Remind yourself of this and that you will be able to help them through these processes for whatever money you aren’t able to save ahead of time.
Many parents find themselves weighing all the pros and cons of saving for their child’s future from the time their child is born. However, taking a few proactive steps can help both parent and child in the future when the time for continued education presents itself. Do your research, take your time, and don’t let yourself break the bank when it comes to saving for your child’s college fund. With a little effort it can be relatively painless.
If you find yourself struggling with debt or would like to find out about becoming debt free, call DebtHelper.com at 800-920-2262, or visit @ www.debthelper.com.
