Ways to help you plan now for your child’s future
No matter how old you children are, thinking about the costs of college is sometimes terrifying. Tuition rates and other school expenses rise every year. School was expensive when you went, it’s hard to image how outrageous it will be when your children get there.
The best way to prepare is to start thinking about it now. Taking the time now to make a plan for your child’s future will help everyone greatly when that day arrives. Use this list of tips to help you get started and ensure your child will have the resources needed for college in the future.
Find the savings plan that is best for you
There are a lot of different investment plans available to sort through. Most importantly, you will want to look for something that will grow substantially over time and that you have to pay little or no taxes on while the money is being saved. Look for plans, like a 529, that you only pay income tax on and avoid extra taxes when putting money in, saving money and even pulling the money out when the time comes.
There are also some institutions and accounts that will put a limit on when and how the money can be used, so that you can be sure it will be used for college only when your child is of age. This will not only help your child in the future, but also to help you leave the money there for your child long enough to let it grow as much as possible.
Start saving as soon as possible
Just like any other savings account, the longer the money is there, the more time is has to accrue interest. It is not unreasonable to start saving for college soon after, or even before your child is born. Having this head start will give your child more money down the road, and cost less for you as the parent.
Work college saving into your monthly plan or expenses
Look at your financial plan and see exactly how much you can commit to college savings each month while still being able to pay for the rest of your expenses. This will steadily keep the account growing. It also ensures that you will avoid financial trouble now and in the future.
If things get a little tighter for a month or two, use sites like HotPayday.com to make ends meet until you get back on track instead of pulling from your investments. Also remember what is more important when it comes to saving money. You will have decades before you want to retire, but there are only a few short years you child is with you before leaving for college. If worse comes to worse, pull from IRA’s and other retirement funds first.
Keep your child involved
Educate your child about the account. Use this opportunity to explain how investing works and why it is so important. This will help everyone understand the process better.
You can also let your child contribute to the account if he or she chooses. Let them have the option of putting their allowance in the account each month. When your child gets a part-time job, allow him or her the option of putting the earnings in the account. This will help the money grow faster and give your child a sense of accomplishment when they are finally able to use their hard-earned money for an education.