With college fees increasing every year, it has become impossible for the average parent to pay their child’s tuition entirely on their own. Making smart saving decisions will at least help you cover a larger part of the fees while keeping your child’s student debt to the minimum. And it definitely pays to start thinking of your college finance planning earlier rather than later. The earlier you start, the more you will save, and the lower the debt.
Here are some tips to help parents start saving money for their child’s higher educational needs.
Enroll in 529 Plans
Many states have 529 savings plans to help families begin saving for college as early as possible. These savings plans are meant to assist with any of a child’s college tuition cost by the time they are ready to enroll in a college.
You don’t have to be a resident of any one particular state to enroll in that state’s 529 plan. However, it may be best to see what options are available in your home state’s 529 plan to get the best deal for you and your child. You also earn tax credits and tuition credits with these types of plans.
Open a Custodial Account
The UGMA or Uniform Gift to Minors Act allows parents to transfer funds to a trust for their minor child. This is known as a custodial account. Any money that is transferred into the custodial account belongs to the minor but is managed by the appointed custodian. This is until the minor becomes an adult. One benefit of a custodial account is that all income from the account is taxed at the child’s rate. The child’s rate is often lower.
Look Into Pre-Paid College Tuition Plans
Not all states participate in this type of system. If you live in a state where you can pay some of your child’s college tuition now, go for it. This allows you to save money further down the road by locking in a good tuition rate now.
Pre-paid tuition plans are exactly what they sound like. Parents may pay part of the tuition now, and then when their child begins college, they have part of that cost paid already. See if this type of tuition plan is available in your resident state.
Encourage Your Child to Take Up an After-School Job
If your child has decided they would like to contribute to their own college savings, an after-school job is the perfect way to get started. Taking up a job in high school is more than just a means to make money. It also teaches your child how to be responsible for planning and working.
The sooner you start saving and thinking about your college finance planning strategy, the more money you can have at hand for college when your child begins their higher education journey.