Strategies for Saving for a Child's College Education

 

Many parents wonder if they’ll ever be able to save enough money to pay for their child’s college education. With tuition rates increasing faster than inflation, this is a valid worry. Fortunately, there are some strategies that can be implemented to help parents save enough to cover at least a large portion of the cost of university studies.

How to save for college


A basic savings account is probably not going to be enough to pay for tuition, but it can be a good starting point, especially if it is created when the child is very young. Even then, there will likely need to be a variety of strategies used to reduce the financial impact later.

Plan ahead – While you may not want to be one of those parents that already know which college the child is going to attend while she is still in diapers, looking ahead is important. Meet with a financial advisor to discuss options and start comparing tuition rates at a variety of schools.

Save when possible – It is important to set up a regular schedule to have funds deposited into whichever account is being used to accumulate funds for the education. Additional deposits should be made whenever unexpected large amounts of money are received, such as a tax refund.

Create equity – Open a home equity line of credit with a bank. This essentially becomes a pot of money from which funds can be drawn based on the amount of equity built into the family home. The interest paid on the credit is tax deductible and the account will come with checks that can be written to cover any expense.

Team effort – Have the child pitch in on efforts to save for the education. Birthday money can be contributed or when they are old enough to get a part-time job a portion of their earnings can be added. Not only will this help the account grow, it will give them a feeling of ownership of the college experience and not feel like it was merely handed to them.

Open a 529 account – These may be the best college savings accounts because they allow high contribution limits, withdrawals are tax-free as long as they go toward college expenses and they are very flexible. While the account is managed by an investment company, overall control remains with the beneficiary. There are also pre-paid tuition 529 accounts in which money is paid into an account based on today’s tuition rates and when the time comes for the child to attend a school, their tuition is paid for – provided the school they attend is part of the agreement.

When a child is crawling around in diapers it can be hard for a parent to think about saving for their college education, but that is the precise time it should be considered. By getting an early start, and using several saving strategies, paying for a college education will not break the family bank.

Katherine Watkins writes for a site that demonstrates how to calculate a home equity loan. She thinks it’s important for parents to plan ahead for their child’s education.