How to Start Saving for Your Kid’s College

By , Posted on Oct 05, 2013
General Budgeting Debt. Saving Money Savings credit card credit cards debthelper.com credit card debt
General Budgeting Debt. Saving Money Savings credit card credit cards debthelper.com credit card debt

Saving for your child’s college education is literally an investment in his or their future. Even if your children are very young and college is a long way off, it’s a good idea to start saving as soon as possible.

“…try the “rule of three” when you start saving for your kid’s college.”

Many experts recommend you try the “rule of three” when you start saving for your kid’s college.  The “rule of three” creates three sources for the financing of your child’s college costs; 1- You use savings to pay for a third, 2- A third from student loans, and 3- A third from future income.

The great thing about using this approach is that you can Start Saving for Your Kid’s College right now, with the knowledge that there are other places you can tap into when the time comes to pony up their college tuition.  In this article we will explore some ideas on how to get you going.

  • Start Early — Just like any other investment, you want to get started as soon as possible… the sooner the better.  It’s just common sense, the more time you have to save, the more money you can save and the more time your money has to grow.  Bank of America had this to say when discussing saving for your kid’s college: “…if you start investing when your child is born, just $100 a month invested at 4.5% interest can increase to more than $33,500 by the time your child is 18,”
  • 529 College Savings Plan — The easiest way to start saving for your kid’s college is a 529 college savings plan. With as little as $5 you can open one of these state-sponsored accounts.  You will see your money grow faster because the money is free of state and federal taxes.  Withdrawals are tax-free federally if they are used to pay for qualified education expenses.  This includes tuition, room and board, books and fees.In the meantime, the account owner, the parent, grandparent or other investor, retains control of the 529.  There is no need to worry that the child can access the account and spend the money on new clothes, electronics or blow it all on a fancy new car.

Start Saving for Your Kid’s College

  • Look for Scholarships — There are a bunch of scholarships and prizes out there that are specifically for paying for college.  The guidance counselor or financial aid advisor at your child’s school will be able to point you in the right direction when it comes to finding scholarships. You can also do some research on your own and check out the internet for websites help you find scholarships and college prize money.  There are many different programs that offer finding for college that will match your interests, needs, and qualifications.
  • Start a College Fund at Home — Involve your kids in saving for their own college.  Starting young, teaching your kids to save, not only will help with the expenses of college when the time comes, but it will teach them how to save and hopefully become financially responsible when they become an adult.
  • Prepaid Tuition Plans — Prepaid Tuition Plans or Prepaid College Plans are investment accounts that permit you to pay for your kid’s future college tuition at today’s prices. If you are lucky enough to have enough money to pay for college now, you could pay for all four-years of college that your kid won’t use for another 18 years. if you’re not able to pay for all of the college tuition now, you can prepay just a portion of your child’s college expenditures.
  • Get Out of Debt — It might sound strange in a list of how to save for your kid’s college, but if you are deep in debt, you will likely be able to just get by paying your essential bills, you will find it impossible to start saving for your kid’s college.
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