Posts contain affiliate links, see disclosure for more details.
As parents, we do all that we can to ensure our children get the best start in life. When it comes to education, college tuition fees are at an all-time high, meaning thousands of students end up getting into debt throughout their course and after they have graduated. To lower the costs and help your children be debt-free, here are 5 tips on how to build a college fund for your kids.
Know Your Budget
Before you can think about saving for your child’s college education, it’s important that you start by working out how much you can comfortably afford to contribute. While it’s only natural that most parents want to play a part in lowering the cost of their children’s college education, you shouldn’t do so if it sacrifices your own retirement. There are various factors to take into consideration, such as whether your child is going to a private or public college, as well as whether it’s local or out of state. Drawing up a budget from the get-go can give you a better idea of your finances, and you will know that you are spending within your means.
Open an Education Savings Account (ESA)
Opening an ESA gives you the opportunity to save $2,000 (after tax) per child, per year. If you begin saving from the moment your child is born and put away $2,000 per year for 18 years, you will only end up with $36,000. If you decide to open an education savings account, it’s likely that you will receive a much higher rate of return when compared to a regular savings account. What’s more, you won’t have to pay any taxes when withdrawing the money to spend on education expenses.
Choose a 529 Plan
If you don’t meet the income limits for an education savings account, or you would like to save more money for your child’s college education, a 529 plan could be another route to go down. Make sure to find a 529 plan that enables you to pick the funds you want to invest through the account. There are numerous plans that you can opt for with your 529 plan, such as prepaid tuition, and education savings. To ensure you’re getting excellent value for money, make sure to keep track of costs such as enrollment and administrative fees that are linked with prepaid tuition plans, as well as management and maintenance fees for the education savings plan.
UTMA or UGMA
A uniform transfer/gift to minors differs from 529 plans and ESAs in the respect that they aren’t created just for education savings. While the account is in the child’s name, the custodian has full control over the account. This will mean you can manage the account until your child reaches 21. Once your child hits 21 (or age 18 for the UGMA), the reins of the account transfer to your child.
Get the Best Deals
There are numerous websites that your child can use throughout their college course to save money that can be put to better use. Whether your child is staying at home or moving on campus, day to day expenses can soon rack up, so checking out sites like Upgraded Reviews can expose you to more deals than you can believe. There are lots of handy coupons and special offers that your child can use to keep costs down throughout their college experience.
With college tuition fees showing no signs of slowing down (not to mention accommodation costs and day to day living), building a college fund for your kids can take the weight off their shoulders and mean that they aren’t in the red after graduation.