The best gift you can grant your child is quality education, as a parent. And this does not come on a silver platter. You have to continually merge resources, which will help you through the draining costs. Saving is one way to leverage the extra funds on your table for your child.
Conversely, as a student, you can also save a lot to help you through college. Let’s show you how.
Tips for Parents Saving For College
The expenses that come with taking your kid to college are no joke and need to be well planned for. You should come up with a clear plan for your child from the moment they set foot on this earth. On the bright side, your kid might work hard and get those rare scholarships that you from college hustle. Conversely but you shouldn’t entirely bank on this, have a solid plan.
Pay Off Your Debt
If you still have not settled your student loan and your credit isn’t looking good, you need to start working on this as fast as possible before you find yourself in deeper. You can alternatively set up an emergency fund that can take care of roughly 3 to 6 months expenses and work on your retirement savings by putting aside part of your monthly income
Decide On the Best Saving Plan for College
You have a variety of college saving plans, and you need to decide on the one that suits you best early enough, from government bonds to trust funds. You can take advantage of these before your kid comes of college-age.
Here are some saving options to consider when you start planning on your kids’ college education:
1. Education Savings Account
This is a plan that will allow you to save up to roughly a net amount of $2,000 per child annually. This plan gradually grows tax-free meaning that by the time your child is 18, you will have around $36,000. It generates more than a regular savings account, depending on how much you invest in it. On the low though its most significant limitation if that you are limited to $2,000 annually, and the beneficiary must fully use the savings before they hit 30.
2. Savings Bonds
This is one of the easiest ways to save for your
child’s college. It entails purchasing bonds from the US government, which
earns you tax-free interest if the intention is to take care of college
expenses. The interest is also free from local and state taxes.
3. ABLE Accounts
This accounts mainly functional to Americans with disabilities, makes it easy for them to save up to $15,000 annually in an account that is tax differed. This account allows people with disabilities, and their families take advantage of a tax-free saving way. And the money can be used to cover all the expenses that were specified when opening it, majorly being college education in this case.
4. Savings Accounts
Majority of American citizens use these accounts to save for their children’s college education. They are what most people prefer, although the interest gained for any investment is minimal. They provide you with safe custody for the expenses you will incur. They are flexible when it comes to investment, making them ideal for saving but don’t offer a lot of tax benefits like other accounts.
5. Trust Funds
These were the first savings accounts before all the rest came into play. Trusts are assets that a parent or guardian transfers to their child and are only available to the child once they hit a certain specified age. Trust funds are very flexible, and the beneficiary can decide to do whatever they wish with the assets gained. Some opt for college while others choose to spend them on luxury. They also come with tones of tax benefits.
Tips for Students
Though parents are the primary source of college money, children once of age can also start actively taking part in building a fund for their college to help cover the expenses that come with it. Parents must still be involved in educating their kids on how to save for their future. Here are ways children can help in financing their college expenses without always directly depending on their parents.
1. Find a Part-Time Job
Students can take on a part-time job before joining a college to earn. If possible, even after joining, they can take on a part-time job to allow them to cover a few expenses of their own. If they qualify, they can also take on a Federal work-study during their college duration. A Federal work-study is offered to both graduate and undergraduates.
2. Apply For Scholarship
Unlike student loans, they are not eligible to pay awards. It is free money offered to students who qualify. They have several ways to qualify like achieving a certain standing in their academics, standing out in sports, or even showing outstanding leadership. Standing out in extracurricular activities and academics increase their chances of a scholarship significantly and parents should encourage this. Lets your child also apply if you think he or she is not eligible.
3. Open a Savings Account
After getting a part-time job, students should not just spend all the cash they get on fun. Consider opening a savings account for yourself. Financial institutions proffer customized accounts for students that don’t require a minimal amount. They are however legible to monthly fees just like any other account. A parent has to be a joint holder in the account; however if the child is below 18.
If not careful as a parent, the amount you spend on your children’s college fee could easily way you down or run you into the ground entirely. College is something you are supposed to start saving up for, from a very early stage to enable your child to avoid unnecessary student loans and also be able to graduate free of debt. It is almost impossible to prevent student debts, but you can minimize them by saving for your kids’ college. This is one of the best ways of securing your family’s future and also your child’s wellbeing financially. You should plan carefully and be dedicated to it, and you will be able to see your child graduate without any debts.