How to Save for College
Save for College and Start Early
A college education is one of the best investments you can make in your children. But paying for it is not an easy task. As with anything you are trying to save for, the earlier start you get, the better. Starting your kids early with an online savings account at high interest is a very good way to start. Studies have shown that kids who have a bank account at an early age, tend to be more fiscally responsible and often have more money set aside for college.
An online savings account at high interest will help your child visually see their money grow. As long as the account is FDIC insured, the money you put aside is secure and will be available for them to use. It is a good idea to earmark a particular account for college. Having an online savings account at high interest will also be an educational experience for your child. They will learn good savings habits and responsibility. They will learn about choices that affect their spending and they will be conscientious thinkers about what choices they will make with their money. These are lessons and habits that will last a lifetime.
You can do some research as to the best accounts to open up. You may choose the corner bank, so your child can actually make the deposits and hold a passbook in their hands. You might choose a local credit union . Or you can choose an online savings account at high interest so that they are getting the highest interest rate available, yet the money is very liquid and 100% safe. An online savings account at high interest will not make your child rich, but together with making regular deposits, their own littel nest egg may be very significant by teh time their college years roll around.
No matter bank account you start for your child, it is important to make sure there are no fees or high minimums attached to the account. You don’t want the money you are trying to save, eroded by needless fees. The idea behind an online savings account at high interest is to keep the money liquid and safe and have easy access to regular deposits. High interest earning accounts will help your child see their money grow a little faster than lower earning interest accounts.
Make sure the account is in your child’s name first, with your name second, so they feel the importance and responsiblity the account will give them. Your child will learn to save money and feel proud and satisfied by seeing their account grow. By helping them realize this is for their college education, you will be assisting them in putting away money for their future.
Online savings accounts is an easy way for your child to check on their accounts, Just be cautious of online security and supervise your child’s activities when they are checking on their money.
Children at younger ages will be more influenced by their parents than teenagers. Teaching your children about saving for college at any early age, has been shown to help them as young adults, be better handlers of money. As college students they are more than likely to keep their monetary lessons in mind and use good judgement regarding financial matters.
If you are thinking of starting a 529 savings plan for college, here is some information you may find useful:
- a 529 savings plan gives you tax advantages that encourage you to put money away now for a college education.
- 529 is also known as a qualified tuition plan and approved by the Internal Revenue
- they are sponsored by all 50 states plus the District of Columbia
There are two different types of plans
A) pre paid tuition plans
B) college savings plans
Pre paid tuition plans allow people who want to save for college can buy units also known as credits for tuition and some even allow for room and board. Your tuition prices are locked into at the current day’s rate. If there is an excess of money, you can use it for qualified expenses towards education costs. Installment payments can be set up relevant to the age of the student until they would attend college. Many plans are backed by the state, and have a limited enrollment period.
For college Savings Plans there are usually residency requirements for state sponsored college plans. You can start a savings account for the student and can choose from different options to invest in. Investment choices include mutual funds, stocks, bond funds, money markets and portfolios that start out riskier and shift into less riskier and more conservative options as the child gets closer to college.
You can usually use the money for any college or university. Mutual fund plans are not guaranteed by the state or insured by the FDIC. You will pay the college tuition at the rate it is when your child enters the university. Books, computers, room and board and tuition qualify as higher education costs. There may be contribution limits of up to $200,000. College Savings Plans are open to all ages, including adults. You do not have to be a resident of the state. Enrolling is available all year.
There are a variety of ways to save for college, from online savings account at high interest to the tax advantage 529 savings accounts to other types of investments. If you start early you have many options, so the best advice is to start today, while your child is young and college is years away.