How To Secure Your Kid's College Fund
Are you asking yourself as a parent how to save for your children’s college expenses? The straightforward guidelines presented in this article will enable you to afford the typical four-year university tuition and safeguard your child’s future.
You probably have questioned how to save for your kid’s college fund. One thing is necessary regardless of your method of choice: you must get started immediately!
Having a college fund for your children’s education is a great way to secure their future. It helps them transition into adulthood successfully without the added stress of financials.
Unfortunately, attending college doesn’t come cheap.
According to surveys, the average cost of one school year in the U.S. is $39,700+ for out-of-state students. Therefore, it only makes sense if you start saving early and diligently.
Table of Contents
How to Save for Your Kids’ College Fund
Look into 529 Plans
A 529 plan can be used for college savings, books, room and board, and other class equipment, such as calculators and computers.
A state government usually sponsors this type of plan. It’s very tax-friendly in the sense that it lets you deduct your contributions from your state income tax. Subsequently, when you finally withdraw money for college, you are not taxed.
To start a 529 plan, you don’t need a lot of capital. You can open an account for as little as $25.
The important thing with a 529 plan is to contribute consistently. Ideally, you should try and do it every month. You can do this by scheduling an automatic deposit each month.
A great tip is to notify your family members about the plan. So, when times like Christmas gifts and birthdays come, they can consider depositing into the college fund account.
You should also ensure to revisit your 529 savings account the closer you get to the date of using those funds. This is because you want to have security so that you can always withstand the risk tolerance of the plan.
Start a Roth IRA
There is another method that you can use to fund your child’s education is using a Roth IRA fund. Typically, Roth IRA is used to fund retirement. But you can use it to fund other things, too.
Similar to 529 plans, IRAs use pre-taxed money to fund the account. Plus, you don’t have to pay extra tax when you withdraw the funds.
You should weigh the benefits and drawbacks of a Roth IRA, just like you would with any investment. For instance, your other relatives can make contributions to 529 plans but not to Roth IRAs.
Despite this, one big advantage of a Roth IRA is that parents can use the funds in it even if their child decides not to attend college, unlike 529 plans.
Put Money into Savings Bonds
Savings bonds were once an excellent way to answer the dilemma of “How to save for your kids’ education fund?” You don’t have to purchase them in paper form like you used to.
Savings bonds can now be purchased online. Previously, the government would guarantee savings bonds. You can be certain that you will make some money because they are also rather low-risk. Savings bonds were still an excellent, safe option for parents who started saving early and regularly. However, the worries persist. Bonds: Will they be a sensible investment in 2023?
The worst year for bonds ever, in Edward McQuarrie’s opinion, was 2022, a professor emeritus of investing history at Santa Clara University. The primary reason for this is the Federal Reserve’s sharp increase in interest rates, which devastated bond prices in general and long-term bond prices in particular. Therefore, given the current state of financial instability, do more investigation before deciding to invest in bonds.
When saving for your kid’s college fund, the journey becomes a lot easier if you have more money. And, what better way to grow your money than invest?
Quite literally, investing truly is one of the best ways to grow your money and make it work for you.
There is no limit to what you can invest. Also, the money doesn’t necessarily have to go towards a college fund. However, what you earn through investments will be subject to income taxes. So, be prepared and invest wisely.
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Use Financial Planning
Managing money for anything can be difficult. Using a financial planner can be of great help.
A financial planner can help you navigate how and where you should best allocate your funds. This way, you can maximize your savings and investments and make withdrawals when the time is right.
What is the Best College Savings Plan for My Child?
A 529 college savings plan is a frequent choice for parents who want to save for their children’s education.
This plan allows your money to grow tax-free if you use the funds towards education eventually.
How to Save for College in 4 Years?
If you want to know how to save for your kids’ college fund in 4 years, then you know there is not much time left in doing so.
But while it is not an ideal timeline to have, there are still things you can do. Instead of simply looking to save, you can look for other things, such as:
- Gift money
- Education investment
- Financial aid
How Much Do Most Parents Save for College?
Most parents aim to save around $55,000+ on average for their child’s college expenses. Parents, on average, expect to pay about 30% of their kid’s education expenses. However, many times, they end up paying around 10%, often needing the help of a loan.
Conclusion – How to Save for Your Kids’ College Fund
You don’t have to wait until your children are grown into teenagers to start working on their college fund. As with any other form of saving, the earlier you start educational savings, the better.
In addition to making the right investments and savings, look into the entire picture. That means exploring other options such as scholarships, grants, and financial aid, and choosing a public school over a private one.
If you enjoyed this article on How To Secure Your Kid’s College Fund or have any questions for me, please feel free to leave them in the comment section below!
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