Saving for Your Child's College Education?

Answer 1

Saving for your child's college education is important not just for the future of your child, but it's also for you.

Putting money away for your child's future education teaches your family good spending and saving habits and it also relieves stress. Here are some easy ways to start saving for your child's education:

Start Small

There's no reason to jump in over your head with savings bonds or IRAs. A simple savings account set aside for your child's future might be enough. Start putting in a small percentage of you or your significant other's paycheck. Look around for a bank with strong interest rates on savings accounts - since this one will be around for a while, it might as well be making money back for you. Even if you don't have much money, or don't think you have any extra to set aside for your child's college education, you can start cutting out one or two things a week and putting that money in an account. Every little bit helps, and a savings account can grow big even if you're feeding it small deposits.

Start Early

Baby on the way? It's time to start saving for that child's future education. Even if you're single and planning someday to have kids, it's never too early to start putting some money away to help with these large, future expenses. College isn't cheap, especially if your child decides to go to graduate school after earning a bachelor's degree. Getting a head start on saving for his or her education can pay big dividends.

Savvy Options

If you understand finances or already have a head start on saving, take a look at education savings bonds. These bonds will accrue tax-free interest and survive any economic downturns. Custodial accounts, which are like trust funds but more openly accessible, are another option. Roth IRAs are perfect for older parents. Technically retirement funds, Roth IRAs allow you to take out money after age 59 without owing taxes. The Coverdell Education Savings Account is set up to provide parents save for education, as well.

Look at a 529 Plan

Do you have multiple children, or just want more control over the money you're saving for education throughout the savings plan? Would you like to have a tax-free account that you have access to but your child doesn't, so you have more control over how it's spent? Then a 529 Plan might be for you. Anyone can contribute to the account and any unused money can be withdrawn without paying a penalty. Also, if your oldest decides not to go to college, you can roll the plan over to another child or to another family member.

Don't Spend It!

This money isn't for you to take a mid-life crisis trip around the country. It's for your child's future, and in effect, your future as well. College and education savings plans and accounts should only be used for that purpose. However, things come up in life. A medical emergency should always take priority. Otherwise, keep the money where it's supposed to be.