Congratulations, you are a parent and that sweet bundle of joy is going to become an 18 year old college student before you know it. We all want our kids to have it better than we had it. And for most that means providing our children with a college education and we know that degree isn’t cheap. Here are a few ways to start saving for your child’s education:
Start Early: The sooner you start saving the better. Your baby may not be walking yet but in a blink of an eye it will be time for college applications and campus visits. Putting a little bit away now helps, try to start saving $100 a month.
Different Aids: Remember there will be plenty of options for when the time comes. Aim for scholarships, these do not require pay back unlike loans. There are many different types of scholarships for students like athletic, academic and some unusual scholarships for students who are left handed or even have a twin. If all else fails you have federal grants and loans. Avoid student loans from private lenders if possible. Start researching now.
529 Plan: Each state has a 529 plan and you should highly consider looking into this for your child. According to howstuffworks.com, a 529 plan has many benefits including:
- You pay no taxes on the account's earnings.
- The child doesn't have control of or access to the account -- you do.
- If the child doesn't want to go to college, you can roll the account over to another family member.
- Anyone can contribute to the account.
- There are no income limitations that might make you ineligible for an account.
- Most states have no age limit for when the money has to be used.
- If the child gets a scholarship, any unused money can be withdrawn without paying any penalty (just the tax).
Tax Break: Whether you take out a loan or pay out of pocket, you may be eligible for a tax break. If you have a loan, you can deduct the interest you pay up to a certain amount based on how you file. If you pay for college out of pocket, in the years you pay tuition you may be able to take federal tax credits: the American Opportunity Tax Credit and Lifetime Learning Credit.
Stocks: Tuition costs are rising and don’t have any plan on stopping. Having a portfolio for stocks is a good way to build savings for the long term. When your child gets older and closer to college, you are able to protect your returns by moving your money into bonds and/or cash.
This is a guest post from Laura Backes, she enjoys writing about all kinds of subjects and also topics related to internet providers in my area. You can reach her at: laurabackes8 @ gmail.com.