💡 The Frank Takeaways:
- Most parents start saving when their children are around 5 years old.
- Starting a 529 Savings Plan is tax-friendly and government-sponsored.
- Savings bonds are government-guaranteed and often very low-risk investments.
- If you don’t have the money for a financial advisor, non-profit organizations can assist parents in planning for the future.
- Consider saving your bonuses or tax refunds.
Saving money for college has never been easier. Between 529 College Savings Plans and thousands of new resources offered by banks across the country — parents and students have access to information like never before. So, what are the seven best ways to save money for college? And how will you know if it’s enough money when the time comes?
Let’s jump in!
Start Saving Earlier
For parents, nothing helps save money for your child’s education like starting early. Whether you open up a 529 Savings account or simply start piling money away, the earlier you do it, the more likely you are to cover the cost when the time comes.
These days parents start saving when their child is around five or six years old, but if you’re ready to start earlier than that, you’ll be ahead of the game. After all, more years of potential growth compound earnings over time.
Start a 529 Savings Plan
529 Savings Plans are government-sponsored and tax-friendly. A bonus of these savings plans is that many states will allow you to deduct your contributions for your state income tax. When the time comes for your child to start college, the money you withdraw will not be taxed.
Like we said above, the earlier you start one of these plans, the more money you’ll accumulate throughout your child’s life. So, do some research and see which plan will work best for you and your goals.
Growth in the use of Section 529 Plans
Consider Savings Bonds
Savings bonds are government-guaranteed and often very low-risk investments. However, they don’t earn a lot of interest over time. It’s mostly just a good way of saving the money to pay for higher education and excluding the income from your gross income.
If you’re looking for ways to save money on your taxes or get more back, while saving for college, savings bonds could be a great option.
Talk to a Financial Planner
It always seems like a huge step to seek help from a financial advisor. However, if you’ve never been very good at financial planning and want to set yourself up for success, there’s nothing wrong with having an expert on your side.
If you don’t have the money for a financial advisor, non-profit organizations can assist parents in planning for the future, including College Foundation, Inc.
Save Bonuses & Refunds
If you already have a savings account set up, add money as often as it makes sense beyond your regular monthly contributions. For instance, if you get a yearly bonus or come into a big tax refund, add that additional income into your savings plan.
Some parents even take the money they save on daycare expenses and put that into a college savings plan. Any amount matters and will help contribute to future tuition costs.
Ask Family & Friends
Many parents are starting to ask family and friends to contribute to a 529 savings plan instead of giving gifts for occasions like baptisms, birthdays, and holidays.
Additionally, many grandparents have started their 529 savings plans for their grandchildren. This helps them when it comes to estate and gift tax liabilities — but still allows the child to have extra savings plan to help them with their education.
Let Your Child Pitch In
Not many parents can save enough money to cover the cost of college tuition fully. If you’re in that boat, don’t feel bad about it, that’s the reason, so many families find themselves taking out student loans.
However, another alternative is to encourage your future or current student to work to help pay some of their tuition costs. A part-time job or even a work-study opportunity can help make up some of the cost and decrease the amount of debt they have to take out.
Plus, it builds experience and will help them as they head into the workforce to find a job!
Saving money for college is a big hurdle that many parents struggle with. Whatever you can save is that much less debt you or your child will have in the future. The important thing is to plan and do your best to keep your contributions rolling in.