1. Avoid Higher Risk
Unlike your retirement account, your child is going to be attend college is less than 18 years. When you think about that, it really isn’t that long! Instead of gambling on the high risk investments, it’s best to plop your money in investments that are save such as CDs or stocks with a great track record. Even if your return is a measly 3%, it’s a lot better than 20%.
2. Take Advantage of Tax Breaks
Throwing money in a money market is a great idea, but did you know that you can get tax breaks with plans such as 529 plans? Using these plans, you will be able to help save for your child’s future and get tax benefits min return. Not only that, you can potentially save thousands in taxes! It’s nice to know that the money would go to your child’s college rather than your government, right?
3. Avoiding Student Loans
If you don’t have enough money saved for your child when they head off, don’t ignore student loans! In fact, there are some great loans available that have very low interest rates. If your family meets certain income requirements, you may also be eligible for financial aid. It’s there for a reason, so take advantage!
4. Don’t Ignore Inflation
While your local college today could be $8,000 for the year, it won’t stay that way 18 years from now. Factoring in 3% inflation, that college education could easily double. Let’s not forget that most colleges are raising rates faster than inflation! When saving for your child, it’s best to factor in inflation so that money is there when the time comes.
5. Using your 401k
While it’s great to help your child in any way, it’s often silly to dip into your retirement accounts. With so many early fees that you may have to pay, it may be better to grab out a loan. Not only is dipping into your retirement account going to hurt you in the future, you’re going to lose out on all the compounding interest that it has to offer in the future.
6. Waiting too Long
Don’t wait until your child turns 16 when saving for their education. You’re going to want to start as early as possible! If you can, start saving right now. Even if you don’t have a child just yet, if you plan on having one, save! Like retirement, the earlier that you save, the more you will have readily available when college time comes. To help you understand what you need to save, there are many great calculators online that can help guide you.
This was a post written by Hannah M. She runs the website Howmuchisit.org a website that has over 2,000 cost helping guides. Here, you will be able to find the price on anything!