School is almost out and you know what that means… summer break! A time for family vacations and barbeques. For many families, however, it is also the time to start preparing their child for college.
Starting or continuing a college savings plan can be one of the best ways to financially prepare your child for college. That’s why I’m introducing three different types of college savings plans: 529 plans, UGMA/UTMA accounts, and Coverdell Education Savings Accounts (ESAs). Here’s what you need to know about each of these options:
A 529 plan is a tax-advantaged savings plan designed specifically for higher education expenses . There are two types of 529 plans: prepaid tuition plans and education savings plans. As their names imply, prepaid tuition plans let account owners prepay tuition at current rates for future use , while education savings plans let account owners save money in an investment portfolio .
An UGMA or UTMA account is another type of custodial account used to save money on behalf of a minor . Although they can be used for any purpose, these accounts are often used to save money for college. One
In today’s world, college is expensive. In fact, the rising costs of higher education make it tough for many families to afford. According to the College Board’s most recent report, in-state tuition and fees for 2017–18 averaged $9,970 at public colleges and universities, while out-of-state students paid an average of $25,620 (1). Those numbers don’t even include room and board or other expenses.
But you can help your child be more financially prepared for college with a little planning. Here are three tips to help you get started:
1. Save early and regularly
Saving for college costs isn’t always easy. But it can be easier if you start early — and by saving just a little bit at a time. To get your children started on the right path to preparing for college, consider opening a custodial account in their name when they’re young. The sooner you start contributing to this account, the stronger the balance will be when it comes time to pay for college (2). It also can make saving easy on your part. That’s because you may be able to make automatic transfers into the account from your checking or savings account each month — without
College is an exciting time in your child’s life. It’s also a time where they’ll be faced with new challenges and decisions that will affect their future. One of the biggest decisions they will make during this period will be how they plan to pay for college, and whether they’re prepared financially to take on student loan debt.
Below are three ways you can help your college-bound child prepare for their financial future.
1. Start Saving Early
Starting to save for college early can help lessen the need for your child to take on large amounts of student debt later in life. If you have a toddler or preschooler, opening a 529 college savings account can be a great way to start saving for their education. As soon as your child is earning income, it’s important to encourage them to set aside money from each paycheck into a savings account or retirement fund so that they begin developing good financial habits early in life.
2. Establish Good Credit
Having good credit history will help your child obtain lower interest rates when taking out loans and applying for credit cards later on down the road. It’s important that you teach them how to build and maintain good credit before they head off to school.
You may consider adding them as an authorized user on one of your
People start thinking about going to college at a young age. They need to start thinking about paying for college at a young age as well. This is one area that parents often fall short, and it can have a lasting impact on their kids’ financial futures.
With the average cost of tuition at a four-year school exceeding $30,000 per year (and some private institutions costing more than twice that amount), you need to begin saving during your child’s early years. If you haven’t done so already, it’s not too late. Here are three things you can do to help your children pay for college:
Start a Savings Account
This may seem like an obvious step, but many parents don’t take it. It’s important to begin contributing to a savings account as soon as possible so that your money has time to grow. Even small contributions can add up over time. You may not see much progress during your child’s early years, but the sooner you start, the easier it will be later on.
Open a 529 Plan
A 529 plan is an investment account designed specifically for higher education costs. It offers tax-free growth and withdrawals, and some states offer tax breaks for making
The cost of college continues to rise, so as a parent you want to be sure your child is in the best financial position possible when it’s time for them to enroll. That means planning ahead, with a focused approach that accounts for their specific situation and their long-term goals. The following tips can help you and your child plan for their future education.
Know how much money you can afford to spend. The first step is knowing how much you can afford to contribute to your child’s college fund. This can include cash gifts, paying tuition bills directly or using 529 plans or other investments to pay for school expenses. In addition, keep in mind that a child’s own savings — such as money earned from summer jobs — can also be used toward his or her education costs.
Make saving a habit early on. To help your child understand the importance of saving, consider opening an online savings account in their name at a young age and making regular deposits into it. As they get older, they can make additional deposits themselves by transferring money from their checking account. Also consider showing them how compound interest works and the potential impact it could have on their savings over time, so they understand that even small amounts saved now can add up to larger amounts in the future.
The cost of a college education continues to rise every year. As college tuition, books, and fees increase rapidly, it is becoming more and more important for parents to save early for their child’s education. It is estimated that today, a four-year degree from a public university will set you back around $100,000. College costs are rising six percent annually—making it imperative for parents to get a head start on saving for their child’s future.
According to the College Savings Foundation, about 92 percent of parents with children under 18 believe that it is important to contribute money toward a college education. A study by the National Center of Education Statistics found that nearly two-thirds of students who recently graduated with a bachelor’s degree left school with debt. Of those graduates, the average amount owed was $23,186.
Parents can use several different types of savings accounts to help them accumulate funds for their child’s postsecondary education. Three options include:
Know Your Sources.
Not all sources of financial aid are created equal. The federal government, state governments and colleges and universities themselves are the most important sources for student aid.
In fact, the federal government is the largest single provider of financial aid for college students, awarding more than $150 billion in grants, loans and work-study funds each year. To apply for most federal student aid, you need to fill out the Free Application for Federal Student Aid (FAFSA) form. It’s a good idea to submit your FAFSA as early as possible because some types of aid are awarded on a first-come, first-served basis.
Many states award grants and scholarships based on FAFSA information as well. Check with your state’s Department of Education to find out if you should also file a state financial aid application form.
Some colleges require that you fill out their own financial aid forms in addition to FAFSA or state forms. Check with the financial aid offices at the schools your child is interested in attending to find out what they may require from you beyond FAFSA and state forms.
Understand Your Financial Position.
You cannot determine how much financial aid you will qualify for unless you know what your family’s