When you bring home your newborn from the hospital, you bring home great responsibilities. A bright future lies ahead of your bundle of joy, and it’s your job to prepare him or her for the road ahead. One of the most important things you can do for your child is to start saving for his or her college education. With four-year college degrees nearly doubling the salaries of students, it’s worth the time and effort to begin saving now so that your child is one of those lucrative graduates.
Here are a few ways you can start saving for your child’s education today.
Invest in Your Child’s Future With an Investment Account
Investment accounts are a great place to start when planning for your child’s education. They can help you increase your savings without the burden of taxes. The most popular of these accounts is the 529 Plan. With no income-based limitations, families can invest their money in these accounts tax-free as long as they use the money for higher education. These investment accounts are perfectly tailored to helping you save for future education now with initial investments as low as $25 per account.
Plan Retirement With Your Child in Mind
While 529 plans cater specifically to higher education pursuits, individual retirement accounts (IRAs) and Roth IRA accounts allow you to save for your retirement and your child’s education at the same time. You can put all your money into one account with these options (and cross your fingers that your child gets a scholarship).
Whether you’re using the money for post-retirement travel or freshman year tuition, you can avoid significant taxes with these accounts. Even better, if you invest in a Roth IRA now, you can use your investments tax-free for college expenses in as little as five years.
Create Savings Accounts Your Child Can Count On
Investment accounts aren’t the only way to save your child’s future. There are also practical savings accounts options that can relieve the future burden of education plans. Similar to the IRA, Cover-dell education savings accounts (ESA) allow you to save money for education without taxes; however, you must deposit up to $2,000 each year to keep up tax-free growth and tax-free interest on withdrawals.
Another option for an education savings account is a custodial account. You create these accounts in your child’s name and have control over them until your child reaches the age of legal adulthood. Eight-hundred fifty dollars of these accounts are tax-free each year, with other deposits subject to a present tax rate.
Avoid Worries Later by Paying Now
Savings and investments accounts aren’t the only options for preparing a profitable future for your child. If you have the money now, why not pay off school now? Prepaid Tuition Plans allow parents to do just that. With this option, you can prepay a part or all of your child’s four-year degree now. These plans only apply for in-state tuition, but don’t worry if your child considers travel in their future. The money from these plans can still be applied; however, the family must make up any difference for any out-of-state tuition costs.
Explore All of Your Options
When it comes to preparing for college, exploring all of your options is key to making affordable and realistic financial investments. The educational environment is always changing, and being aware of current trends, including the growing importance of online courses, can help you make the right decisions for your child.
For instance, if your child is an aspiring nurse, knowing that he or she can get an accredited degree through online FNP classes is critical for making an affordable investment that works for both your child and your bank account.
There are a variety of options for preparing an impressive future for your child. Making those decisions now and having a sound plan for supporting your child’s aspirations and career goals is key. Whether it’s an investment account, a prepaid payment plan, or a custodial savings account, you can rest assured that when the time for college comes, you can help your student choose schools with confidence.