My hubby and I are big on saving for our children’s education – even if it has meant I have no budget to get my hair done as often as I would like. So when I was contacted by a fellow writer looking to gain online exposure, who had fabulous tips to share, I knew this would be a great feature for her. Learn away, friends!
Read any typical American newspaper, and you’ll surely find an article indicating the outrageously rising cost of a college education. Things aren’t likely to change in the future either. Still, a college education is necessary for the future of your child. As such, if you want to be able to afford university fees tomorrow, you must start investing today, no matter how old or young your child is. Here are some simple ways to do just that.
1. Invest in a 529 savings plan.
Perhaps the easiest way to save money for college is to enroll in a 529 savings plan. The 529 plan is named after the 529 section of the IRS tax code, and it is a type of investment created by the government that encourages participants to save for college. There are two types of 529 plans, one of which is the savings plan. The savings plan is administered by the states in which you live, and the contributions that are made to the savings plan are invested in mostly mutual funds. As such, the outcome of the 529 savings plan is based on market performance. The best part about the 529 are the tax advantages and relatively low risk [but ultimately the risk will depend on the investments you choose].
2. Invest in a 529 prepaid plan.
The 529 prepaid plan is the second part of the 529 plan. With prepaid, you will essentially be buying tuition credits, based on the price of tuition currently. This is a good way to protect against tuition inflation. For example, if you pay for a certain amount of tuition credits, and this number of credits covers the price of a year of tuition now at college X for $10,000, then the prepaid plan covers the cost of the year. In other words, even if ten years from now, the cost of attending a particular college is $20,000, you’ll still only pay $10,000. There are several pros and cons for each 529 plan, about which you can learn more here.
3. Always apply for financial aid.
Even though it often takes some time to fill out the paperwork, and even though you may think that you make too much to qualify, it always pays to apply for financial aid once your child is applying to school. Filling out the FAFSA early is the best way to secure funds you wouldn’t have otherwise had, include government grants that don’t need to be paid back.
4. Start higher-risk investing when your child is young.
Whether or not you invest in one of the two 529 plans, investing is important. If your child is really young, you can afford to take on high-risk spending that has the possibility of large returns. As your child gets older, look into more conservative investments plans. For an easy-to-follow run down of an investment strategy for college saving, check out this CNN money article.
5. Look into tax credits.
In the process of paying for college, you can take advantage of several tax credits that can work in your favor. For example, the American Opportunity and Lifetime Learning tax credits enable you claim these credits if you are paying tuition for a dependent in order to make the cost of college more affordable. For more information on the details of such credits, check out this US News article.
This is a guest post by Nadia Jones who blogs at online college about education, college, student, teacher, money saving and movie related topics. You can reach her at nadia.jones5 @ gmail.com.
Have you started to save for your child’s education? If so, what have you done?
Also, if you have 5 fab tips to share for this weekly feature, shoot me an email: laurenmarieweber @ gmail.com.