With college costs increasing, most parents are starting the process of saving for college at a much earlier stage. Nearly 98% of parents believe in saving for college early because they think it is suitable for their child’s future. 87% of people, on the other hand, said that they would go out of their way to provide their children with the best opportunities in terms of education. Even with this kind of willingness, getting enrolled in a college in the country calls for large investments. If you are also planning on saving for college, here are some tips you can follow to ensure that you get the best returns and planning:
1. Start earlier
Did you know that the average age of a child for parents to start saving for their college has decreased to five from nine? This helps parents to weigh their options better, while also helping them to take benefit of compound interest and the potential growth that a fund holds.
2. Save up more, take lesser loans
There are many plans that you can consider, an Education IRA (Individual Retirement Account), a minor gift certificate, or the most common of them all, a 529 plan. Instead of going for an education loan, it is better to save up beforehand. This will help reduce your financial burden at a later age as student loans are known to take a long time to be paid off. Most parents want to start saving for college at an earlier age because they want to avoid having loans to repay at a later stage in life, as it is a burden they do not want their kids to take.
3. Set realistic targets for savings
Parents are becoming financially disciplined and a lot more realistic in terms of potential college education costs. They want to start saving for college without compromising on any other priority like retirement savings. While this is necessary, it is important to remember not to overshoot or undershoot possible education expenses.
4. Invest in plans like 529
A 529 education plan offers not only growth potential as well as withdrawal facility but also tax-free withdrawals if the funds are used for higher education. Even so, the contributions made to this plan are not eligible for exemptions from federal taxes. On the other hand, these plans grow tax free. Additionally, you can use any plan from any state for a college that is eligible for it.
5. Invest bonuses as well as tax benefits
Our finances flow in from multiple sources, so people are looking for multiple options even when they are saving for college. This may include earnings, tax refunds, and bonuses. There are various ways to put money into your saving plans. For instance, parents whose children are graduating from daycare to public elementary can divert those funds to invest in a 529 savings plan.