We all have trouble dealing with the debts we accumulated during our student years, and it’s safe to say that we all wish that our parents had saved up for our college fund. The cost of attending college is now bigger than ever and only 51 percent of families in the US have set aside money for their kid’s college tuition.
According to a recent study, 51% of parents have used 529 college savings plan to save money for their children’s college funds. This is because 529 Savings Plan offers valuable tax benefits, and it is one of the most popular and effective ways to save for college. The 529 Savings Plan allows parents to contribute money for their children’s college funds. The money can be invested in mutual funds, bond funds, or other investments. The money will grow tax-free and can be used to pay for college expenses.
These are some alarming statistics, but even though a lot of people are aware of them and would like nothing more than to start saving up money right now, this is not something that can be done overnight. Starting a college fund takes a lot of careful planning and some sacrifices, especially because you already have a ton of your own debts to deal with, so let’s look at some of the 529 college savings plan strategies you can apply to get the ball rolling.
What makes a 529 college Savings Plan so attractive to parents?
Parents are using these funds to save for their children’s college expenses. Here’s why:
1. Tax Benefits: With a 529 Savings Plan, parents can take advantage of tax deductions, tax credits, and other tax breaks that can help them save money on college expenses.
2. Flexibility: This type of plan allows parents to save money as they go, allowing them to adjust contributions as needed.
3. Easy to Manage: Parents can easily manage their 529 Savings Plan by setting up automatic contributions or making manual deposits when needed.
4. Secure Funds: Funds in a 529 Savings Plan are held in trust, meaning they are secure from creditors or any other legal claims.
5. Growth Potential: A 529 Savings Plan has the potential to grow over time, providing a larger return on the money invested.
Outline a strategy
You can’t go into this blind; you’ll need to follow some basic guidelines and have a clear goal in mind if you want to save enough money to see your kid through college. For instance, you should talk to your partner about what part of the scholarship you will be able to save up for, or you might decide to try and pay the whole thing, whether you’ll need your kid to chip in once he or she starts working, whether there are some scholarships available and so on.
Another thing to think about are the different types of plans that can make the whole process easier, and you can also look into some easy ways for you to earn some extra cash that could go directly into the “college jar”. Be sure to write all these things down and try to err on the side of caution when making your estimate.
Start Early and Do Not Stop
Here, time is the vital ingredient for successful investing, but the thing that frightens the parents is the tax-efficient nature of 529 college savings plan. This is why you need to start saving early to ensure that the asset appreciation will be directed to your close family, instead of someone else, and doing this will really boost your kid’s college fund.
529 College Savings Plan are a Godsend
Now, for of the people out there who don’t have a lot of experience with financial topics, a 529 College Account is just what the name suggests – an account where you put away all the college money you save up, and the payments are made based on a well-structured plan that allows you to choose an option that best suits your lifestyle.
So, what makes it different that just your average 529 college savings plan? Well, for starters you will only have to pay your taxes once – whenever you decide to actually withdraw your savings. Another, and arguably more important fact is that once the account is set up, you can’t dip into it unless your youngster has finally grown up and needs to pay his or her college tuitions. You have a couple of options available, and which one you choose depends on whether you want the account to be used to cover just the tuition costs or whether you need something more comprehensive that would cover all the expenses that come with going to college. So, explore your options carefully and try to find a payment plan that works for you.
Explore reward programs and similar perks
There’s an interesting option that not a lot of people consider – some stores actually allow you to use the points that you earn as a loyal customer to be exchanged for money that goes towards your kid’s college fund. While you are shopping you can also save a hefty sum of money if you use voucher codes and coupons, which can now easily be found online.
Certain credit card companies also allow you to use the points you earn to slowly grow your higher education savings fund. If you play around with similar perks offered by different businesses you can, over time, make a fairly impressive difference.
Reach out to the people around you
I know that no one really feels comfortable asking others for money, especially if it’s their close relatives and friends, but there is a way to work around this issue. One thing you can do is to simply let everyone know that you’d appreciate it if they contributed money for your kid’s college fund instead of buying little gifts and trinkets on certain occasions, or just limit this deal to your family and let everyone else get creative with toys or clothes.
Your kid can even help raise some money for the fund by offering to help out some relative in exchange for a few bucks towards their college savings, e.g. old grandmothers who need their lawns mowed, an aunt who needs a babysitter or even a kind old neighbour who needs someone to do their shopping.
Look at all the little things you’re wasting money on
Once you start looking closely at your spending, you will be surprised at how easy it can be to save some money for your kid’s college fund. For example, one mom started making her own coffee in the morning, and stopped buying it on her way to work and saved $1.500 in only one year. Even if you manage to save $50 per month and invest it, you can make a huge difference, because of the magic of interest.
It is often easy to postope making serious 529 college savings plan, because we simply don’t want to deal with a complicated issue that we won’t have to face for at least another decade, saving up large amounts of money can be a lot easier if you start early.
Don’t rush anything, but do take the time to go over some of these points with your partner, if you have been considering having kids or already have a toddler running around the house, and come up with some sort of long-term plan.