If you are a new parent, in between diaper changes and midnight feedings, you may already be thinking about the day when you send your child off to college. Parents are always thinking about the future. Even if your children are still small, it’s never too soon to start saving for college.
With college tuition reaching over $40,000 a year in 2020, the time is now to start planning for your child’s college fund. The sooner you start, the more likely it is that you will be able to fund your child’s dreams of higher education.
Whether your child wants to go to an Ivy League college or American International College, it’s best to start saving for tuition as early as possible. Let’s take a look at a few ways that you can start building your child’s college fund today.
Open a 529 Account
A 529 savings account is a government-sponsored program to help parents save for their child’s college education. These tax-deductible accounts are the perfect way to ensure that your savings will be compounded for the future. When it’s time to withdraw your money, you will not be taxed on the income. 529 accounts are available in every state, but you are not limited to just those options. You may open an account in any state regardless of where you reside.
Talk to Relatives
Grandparents and family members are likely to spend a fortune on your children in the form of birthday and holiday gifts. When your child is young, have a frank conversation with your relative about contributions to their college accounts. Along with store-bought gifts, ask your family members to consider making gift donations to the college fund to help build the savings. You will be surprised at how quickly the account will grow when the whole family works together.
Life Insurance
Permanent life insurance policies are meant to pay out a benefit after the holder dies, but they can also be used for other purposes, including college tuition. With a permanent life insurance policy, a portion of your premiums go towards your payout, and the rest is diverted into a savings investment account. The savings portion of your policy can be accessed at any time for a variety of purposes without penalty. If you take out a policy when your child is young, you will be able to get the insurance protection you need along with a lump sum of savings that can be used to pay college tuition in the future.
IRA Savings
You may think that an IRA is strictly for retirement savings, but you are free to withdraw your money for various reasons, including paying for college tuition. An IRA is an excellent way for parents to save after-tax dollars that will be protected and remain tax-free as they grow. If your child decides not to attend college, you can use those savings to help fund your retirement.
It may seem like sending your child to college is a distant prospect, but that doesn’t mean that you shouldn’t start preparing now. Starting a college fund early, whether you use a 529 plan, an IRA, or an insurance policy, is a smart move for every parent. Starting your college fund early allows you to increase your investment savings and reduces the potential student loan amount that your child will face when it’s time to head off to campus. If your child is already walking, it’s time to start investing in their future so they can confidently walk towards their college dreams.
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These are really good ideas that I think every parent should think about! I wish I had had a kick start on my college funds, I probably wouldn't still be in debt from it! Thank you so much for sharing m