Thirteen may not be the luckiest of numbers but 2013 is certainly a pretty good year to get a good financial footing, in case you’re not much fussy about your finances. The American couples have been saving for 2 purposes, home down payment and retirement but what about saving money for your children? Well, you have different options when it comes to saving money for your child and the one that is right for you will depend on whether you can afford to tie-up for a certain period of time, whether you wish to save on a regular basis or whether you want your child to have access to money. As parents of kids, you ought to save money for your children’s future as the college costs are spiraling out of control and you need a cushion to help pay off debt. Here are the tips that you may follow when it comes to saving money for your kid’s college and the future.
- Start off with a 529 college savings account: According to recent surveys, 60% of adults haven’t ever heard of a 529 savings plan, even though the advisors are of the opinion that this is the smartest way to save for the college tuition costs. The accounts that are sponsored by different states, allow parents to invest their after-tax money that grows as tax-free and remains tax-free if you use it to pay for your tuition costs. Depending on the age of your child, you should be more aggressive and then become conservative as your child gradually gets older. The 529 college savings account comes with few limits on how much parents may contribute, irrespective of their income level. So, parents have a lot of flexibility and can even choose plans that are administered by any state. In some states, even shopping rebates are added to the 529 accounts.
- Opt for prepaid tuition: There are many states that offer prepaid tuition plans through which parents can purchase tuitions at today’s rates, essentially locking in the lowest price, irrespective of how much the tuition costs rise. What many parents rarely realize is that the states use this pre-paid tuition system at any school including the private colleges anywhere in the country and this loophole makes such plans one of the smartest things available for colleges. So, if the present rates are low, you can start buying them now and the money will be guaranteed by the states.
- Save money in a dedicated child’s saving account: In the current market, savings accounts actually carry relatively low interest rates but not only this, they even come with other advantages too. This also gives them an added opportunity to teach children about savings and money as they gradually get older. The savings account, either in the child’s name or the parent’s name can easily supplement the other. Some banks even offer some other teaching materials along with the savings accounts of kids and also eliminate the fees for low balances and the requirements for minimum balances.
- Leverage your employer’s college savings plan: There are some companies that offer direct deposit into a college savings account and this makes it easier to automate savings. There are some companies that avoid it because they don’t want to take responsibility of choosing 529 plans, especially when they have employees in more than one state. The companies also offer small, private scholarships to the children of employees, usually $1000 or $2000 to help avoid paying some costs.
Therefore, when you wish to save your dollars for your kid’s future, you may follow the above mentioned tips. Having a cushion is necessary as there are tough times approaching for the entire US nation. Cut back on your expenses and help your kid shape up his future and grab a college degree.
This article has been contributed by Yasmine Wilson. She is financial writer associated with Debtcc community.
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