Every parent wants their child to have the best opportunities in later life and that all starts with a good education. The problem is, the cost of college just keeps going up and people are left in a difficult position because they have to decide whether they are willing to take on a huge amount of debt for their education.
However, your kids don’t need to make that decision if you can cover the cost of college for them. Although there is some debate about whether parents or kids should be responsible for the cost, most parents will try to save at least some money to put towards their child’s education when they get older. But a lot of people don’t know where to start when it comes to saving for college. If you want to start a college fund for your child, here’s everything you need to know.
Research College Costs
Before you can do anything else, you need to research the average cost of colleges so you know roughly how much you need to save. It’s best to research the cheaper options like community college and in-state universities as well, and when the time comes, have a discussion with your child about these affordable options. If they do want to go down the more expensive route of a private college, they may have to contribute something themselves.
The cost of college varies a lot but state colleges will charge an average of $10,320 for residents and $26,290 non-residents every year. Private colleges are even more expensive and the average yearly tuition is $35,830.
Review Your Budget
Now that you know how much you need to save, you can work out how much you need to pay into your child’s college fund every month. It’s important that you review your budget and work out what you can realistically afford to pay and remember, you won’t necessarily be able to save the full amount. You can use an education savings plan calculator to work out exactly how much you need to put in each month. Follow the link to read more about finding the best calculators. It’s important that you find a good balance and only pay in what you can afford so you don’t cause yourself financial issues in the short term.
Choose Your Savings Account
There are a few different types of college savings accounts that you can choose from. A 529 college savings account is a good option because the state does all of the hard work. You pay in and they will make investments with the money so it grows. As your child gets closer to college age, they will reduce the risk involved with investments to prevent any losses.
If your child already knows what college they want to go to or you have reviewed your finances and decided that you can only afford in-state college, you can use a 529 prepaid tuition account. This allows you to put money in and pay tuition at the current price, which means that you don’t get caught out by rising costs in years to come.
An Education Savings Account (ESA) is similar to a 529 college savings account in that investments will be made with the money, but it is a private account rather than a state run one.
Once you have chosen the right college savings account and calculated your monthly payments, you just need to stick to it and you will soon have a healthy college fund for your child.Category: Uncategorized