Two words: College Savings.
College can seem like a lifetime away, but it will be here before we know it. The U.S. Department of Education estimates that tuition in 2030 is going to cost approximately $205,000 for a four-year degree. You can also estimate the cost of college for another future date here. That number can easily make anyone cringe.
As a parent you want to encourage your child to go to college and get a good education. When it comes with a hefty price tag, it’s an expensive goal to meet. It can be daunting, especially if you still have student loan debt yourself. Here are a few ways to start saving for your child’s education and tips:
College Savings Plans
This is a tax-advantaged college savings plan that allows you to put money away in a savings plan, and any earnings can’t be taxed as long as it’s used for eligible college expenses. There is an incentive of a tax benefit if the investor is a resident of Iowa.
Information needed to open an account:
- Social Security numbers
- Birth date
- Bank information
- Minimum of $25 contribution
This is a tax-advantaged investment account designed to cover future expenses (elementary, secondary or college), tuition, books, or uniform(s). The money in the account will grow tax-deferred, and withdrawals will be tax free as long as it’s used for eligible college expenses.
- Lower contribution limits compared to a 529 account
- There is an age limit of 30 years old for the beneficiary.
- Allows you to withdraw for qualified elementary and secondary expenses
- Income level of donor may affect contributions.
A conservative option would be to invest in a traditional savings account at your local bank. This option can be appealing, as it has a lower risk and can come with fee-free accounts. Just make sure to shop around for the best interest rate, as an average rate is 0.06 percent.
Register for a free account to earn money whenever you’re shopping, dining, or traveling. Whenever shopping online, make sure to shop through the Upromise link to earn a percentage back on your purchase. The best part is that it can be linked to your 529 plan without any hassle.
This is a great suggestion for relatives who are struggling to get a meaningful gift when it comes time for special occasions. It’s a convenient service that allows a contribution to a 529 plan anytime online or by mail.
If you’re planning ahead for your child’s college savings, I hope you found some helpful advice to get you started with the right plan for your family.