It is important to remember that saving for your child’s education absolutely is possible. The key is to learn to separate your savings in a place where you cannot touch it until it is time to use it for your child’s education.
This way, you will have the right amount of money that you need to contribute to your child’s education at the best possible university that they are accepted to.
Additionally, it is vital to understand that education is the best gift that you can give to your child and thus, it is essential to put the proper amount of money into savings through diligent planning to give them gift that will serve them in their life and career for many years to come.
Your child’s college tuition is something that is going to be a major expense for you down the road, particularly if your child decides to study in the United States.
What is important to remember is that there are ways to begin saving so that you have the proper amount of money to provide the best possible collegiate education to your child at the best university that are admitted to.
Consider these viable tips on how to start saving for your child’s education:
1. Consider Freelancing
If you do have a traditional desk job, sometimes the salary is not enough money to both live in the United States and to save. How to assist this is to consider running a freelance business on the side.
If you play your cards right, this could lead to a substantial amount of money down the road that could even cover the majority of tuition costs.
2. Tax Yourself
When considering ways to save, it is wise to think of your child’ education fund as another federal government that is taxing your earnings each year.
For example, whatever you have to pay to the federal government, also pay it to your child’s college fund. By the time that your child is eighteen, you will be amazed at what you have saved.
3. Have Enough for the First Two Years at Least
When planning your child’s college fund, be sure that you have enough for the majority of the expense and then, it will allow you two or three additional years to save while they are in school while you already have the current year paid for. This will give you a substantial head start in paying for their tuition.
4. 529 College Plans
Once you do have the money saved each year, it is wise to open a 529 College Plan. What a 529 College Plan does is that it allows you to save a great deal of money towards your child’s education and does not allow you to withdraw that money unless it is for qualified educational expenses.
This is a great tool to use if you are not the best at saving and need discipline to achieve your savings goals for your child’s education.
Additionally, if your child does not end up going to college for some reason, there is a way to withdraw the savings from a 529 College Plan; however, you will experience several tax penalties.
5. Roth IRA
Roth IRA’s are traditionally used for retirement expenses; however, they can also be a great tool for saving for educational expenses. Usually, when one has a Roth IRA, they save so that they can withdraw money when they reach their mid-50’s without paying any taxes.
That being said, these accounts are great for educational expenses in that the parents can put money away and then within draw after five years for certain qualifying educational expenses.
If you have been unable to save up until five years before your child goes off to college, this can be a great tool to assist you to save a great deal of capital quickly and not have the temptation to withdraw the funds for other purposes.
6. Prepaid College Tuition Plans
If you are sure that your child will be attending a college in state, then it is wise to consider a prepaid college tuition plan. What a prepaid college tuition plan does is that it allows you to pay tuition in advance at the current tuition rate that year.
If you do this, you will not be subject to tuition hikes even if your child will not be attending college for many years. This is a wise investment because it also allows your money to be put in a place where you are unable to withdraw it for other purposes.
How these plans become even more valuable to the parent is that if they buy $5,000 worth of tuition at a school where it is $10,000 per year, the parent will invest in half a year’s tuition.
When the child is ready to attend, the parent will then have invested in 50% of the tuition price regardless of if the tuition has raised to $20,000 per year.
Their investment will be worth $10,000 rather than the original $5,000 that was paid. If the parent has the financial resources to do this for the entire tuition, they will essentially pay half of what they would have otherwise.
7. Coverdell Education Savings Account
By using a Coverdell Education Savings Account, you will have a major advantage in that it is not considered your child’s asset. This will be instrumental in assisting them with getting financial aid if need be.
A Coverdell Education Savings Account is typically tax-advantaged if it is only used to pay for qualifying educational expenses. What makes the Coverdell Education Savings Account different is that it can also cover private school tuition for grades K-12 in addition to college expenses.
8. UGMA and UTMA Custodial Accounts
Another way to save for your child’s education is to gift them their tuition money that is held for them until they reach adulthood in a UGMA or UTMA Custodial Account.
UGMA or UTMA Custodial Accounts can be considered your child’s asset, which should be carefully assessed because it will impact their eligibility for FAFSA.
That being said, these accounts also have a plethora of tax benefits for saving for education. One aspect to consider carefully is that UGMA or UTMA Custodial Accounts transfer the assets to your child when they turn eighteen or twenty-one, which means they can use the funds for educational expenses or something else entirely.
9. Gift of College
This is a way to set up a gift fund that allows friends and family to gift money to your child’s college fund that is located in a 529 College Savings Plan. While this is free to register for, there is also a 5% processing fee when you receive a gift.
10. Fidelity Investment Rewards Signature Visa Card
Fidelity offers a very interesting investment rewards savings card that does not give the traditional rewards that one would think such as airline miles.
What this credit card does is that it provides rewards towards your child’s 529 College Savings Plan.
Thus, if you open this account and allow it to give yearly awards to your child’s 529 College Savings Plan, you will be able to make a substantial difference in the amount saved by even potentially having one semester’s tuition based on credit card rewards.
Upromise is a place where you can register for a free account and earn cash back for your child’s college on shopping and dining options. You will be able to increase your balance by registering your credit cards, grocery cards, and loyalty cards.
For any purchase that is eligible, you will get rewards towards your child’s tuition. You will be amazed how much this will add up to over time and could even cover a semester’s worth of book fees.
12. LEAF College Savings
This site provides a platform where family and friends can donate a monetary gift toward your child’s education. They are able to select the amount of the gift and send it to you via email, mail or Facebook.
After you receive the gift, you are able to redeem the gift by entering the number on the card and transfer it to your 529 College Savings Plan.
13. Remember to Start Early
A pertinent example of how even the smallest amount of savings adds up is that if you dedicate yourself to saving $50 per month after your child’s birth, you will have $20,000 by the time that they turn seventeen. This is an incredible way to have a great deal of money available to you.
Additionally, if you were able to increase that month to over $100 per month, you would have over $40,000 by the time that your child turns seventeen, which is a spectacular amount of money to afford some of the best schools that the United States has to offer.