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College education has an extremely high price tag. In fact, the tuition fee for public colleges in the US averages at $10,116. While that still seems a little reasonable, it can easily balloon to $36,801 if your child decides to pursue their degree in a private institution. What’s worse, most college graduates leave school with a loan debt amounting to $27,000.
As parents, we only want our kids to have the very best. That’s why it’s important to start early with saving for their college fund. With that said, we’ve listed five tips below to help you start preparing for your kid’s college life.
Save consistently
Saving up for your child’s education can be tough, but you have to do it consistently in order to secure their education. You can do this by treating your savings as if it’s a monthly incurred bill. Try enlisting your child’s college fund as an automatically incurred payment every month. This way, you won’t miss a chance to save for your child’s future.
Choose the right college savings plan
You’ve got a ton of options when it comes to college savings accounts, but the most popular ones might be 529 plans. There are two types of 529 plans, and both of these have financial aid and tax benefits to help protect your college fund. First is the “savings” 529 plan, where you can invest after-tax money into bonds and stocks, and then withdraw it tax-free for your child’s college expenses. On the other hand, there is the “prepaid” 529 plan, where you can pay some or all of the costs of your child’s college education at a predetermined price.
Both have their own drawbacks and benefits, which is why experts recommend employing both prepaid and savings 529 plans. But if you’re not financially capable of doing that, it’s perfectly fine to stick to one 529 plan — just make sure to do your due diligence to find one that fits your lifestyle and goals the best.
Use financial tools
Of course, it’s crucial to have an estimate of how much you need to save before you start depositing in your kid’s college savings account. Thankfully, there are financial tools like calculators to help you map out the total costs of public, private, and vocational colleges — and some can even help you draw up how much financial aid your child will receive in the future.
College cost calculators vary depending on their purpose — some are wired to give you an accurate estimate if you know which college your kid wants to attend, and some can give you a more general evaluation. However, to ensure that you get a precise estimation, it’s best to have your documents ready, including your income, tax returns, savings, your kid’s SAT/ACT scores, and tax returns.
Don’t be afraid to ask for help
If you’re not exactly well-versed in financial literacy, it might be a good idea to go see a professional. After all, professionals with degrees in finance and management have been trained to apply financial theory to real-life markets, and their financial planning skills can certainly come in handy when you are planning out family savings, investments, and budgets for the next decade or so. This valuable skill is one of the reasons why demand for financial planners is expected to grow steadily until 2024, as more and more people become more conscious of the need to be financially independent.
Recently it’s been noted that colleges have been investing more in their financial planning programs, so finding an adept and reasonably affordable financial advisor shouldn’t be that hard of a task for you. So if you’re easily confused on the topic of college funds and investments, try consulting with a trusted financial planner in your area.
Be smart with your purchases
Once you decide to build up your kid’s college fund, strap yourself in for the long haul. Every purchase should be highly calculated and unnecessary spending must be kept to a minimum. That’s why it’s important to learn how to craft a monthly budget that covers your purchases, bills, and savings.
One tip to help ease monthly costs is by signing up for a credit card that has a good rewards system. As you use your credit card, you accumulate points that can be redeemed through other expenses — and some can even be deposited into your child’s college fund.
Article intended only for the use of fatherville.com
Article by: JBloomfield
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