Saving for College Education
March 13, 2007
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Education is a key to the future, but higher education is not free. The cost of tuition and room and board increases each year. By the time your toddlers are ready to attend college, you could be looking at a cost of at least $60,000 dollars a year for four years. If your child chooses a private school, the cost will be twice that much. What can parents do to make sure that they can help pay for the cost of their child’s education? Here are a few ways that you can begin to save money now, even if your kids are approaching their teen years.
The 529 plan- A 529 plan is a college savings plan that allows parents to contribute monies in any amount towards their child’s future educational needs. Special tax benefits are provided to the plan owner and withdrawals can be made tax free for qualified education expenses. The plan functions like a 401(k) plan in that you decide how your portfolio is managed. You choose how the money is divided amongst the investment options. Every state now has a 529 plan. Accounts are held in the name of the parents so that the child’s opportunity for financial aid from the government is not compromised. Check out http://www.upromise.com for information on their 529 plans.
The savings account- This is an old standby but a good one. Have a set amount of money deducted from your check and deposited in your savings account every time you get paid. Interest rates for savings accounts run about three and a half percent these days. That’s not a lot, but once the account reaches $500 or $1000, take the money and open a Roth IRA or buy mutual funds. For the mutual funds the average percentage yield is higher the more money you initially put in. This is a way to stockpile a lump sum to get the ball rolling on an account that has will give you a higher rate of return. Once the savings account is depleted, start again.
Check out government grants- The government has grant funds totaling in the millions of dollars. Grants are available for people with individual skills. You could receive a grant on the basis of athletic ability or writing skills. Grants are available based on race, religion, sex, etc. Parents should check out http://www.scholarships-ar-us.org/grants/. The best thing about grants is that they do not need to be repaid. Keep careful records of all transactions that the grant money is used for to avoid any problems with the government later.
Saving for college shouldn’t cause you a headache. Investigate your options and nail down a plan of action. Your children will thank you.
To learn more, check out the Mom’s Talk eBook’s Guide to Family Budgeting - Step-by-step guide to help you establish a workable budget.
Posted by admin | Filed Under Money & Finance
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