As soon as you have children, you will need to start thinking about how you are going to start saving for their future education. As we all know, college is expensive and the cost of tuition is constantly rising, leaving graduates with a mountain of debt. The best thing you can do set up the funds for their future education which you can start doing today. Here, we are going to take you through exactly how you can start saving for your children’s education.
Open A Savings Account
Online bank accounts are the best way to start saving for your child’s education in the future. A savings account will allow you to put money away every month and keeping this money completely separate will ensure that you don’t accidentally spend it. Get into the habit of putting money away into this account every month and the earlier you start, the easier it will be to get these important funds together. Open this account shortly after having your child to start the process. To help you get started, have a look at the BB&T online bank accounts as they offer basic checking accounts that are simple to manage as well as an option that boasts many premium benefits.
529 College Plans
Alongside opening a savings account, there are many other additional ways in which you can start getting the money together for your child’s future education and one of these ways is the 529 college plan. This is similar to a Roth IRA as a 529 college savings plan will allow you, the parents, to invest after-tax money into diversified, low cost stock and bond funds. What’s great about this plan is that you can then withdraw the money tax-free for qualified education expenses. This offers you a massive tax advantage as once you use it to pay for the tuition expenses you won’t ever have to pay taxes on these funds.
Prepaid Tuition Plans
An alternative to the 529 savings plan is the prepaid tuitions plan. This plan allows parents who know their child will be attending an in-state public university to pay for tuition credits in advance and at a predetermined price. While this is good for the tax benefits and it won’t be subject to swings in the stock market, there are some limitations to this savings plan. For example, if the child does not go to an in-state school, while you will get a return on your money, you won’t get the full benefits of the plan.
Finally, the last way in which you can prepare to start saving for your child’s education is to open a Roth IRA in their name once they start to earn an income. Restrictions on this mean that withdrawals will keep investors from taking earnings out penalty free.
Like all investments, the earlier you start to save, the more time your money will have to grow. This should give you the motivation that you need to start saving now if you have not already done so, so you can give your child the very best education in later life without having to worry about the financial implications of doing so.