Start a College Savings Plan for Your Child
Although no one would argue about the necessity of going to college (or some type of higher education facility after high school), many families aren’t prepared to deal with the rising cost of a college education. When your children are young, you think you have all of the time in the world to come up with a plan for paying for their educations. Then, before you know it, little Johnny is headed of to college.
Paying for your child’s college expenses doesn’t have to destroy your financial future. You just need a plan. Examining the basic components of college planning will give you all the direction you will need as your create your own roadmap to your child’s college days.
Start Early. Like retirement planning, saving for your child’s college expenses is best started as soon as possible. In fact, I’ve had friends who have started their baby’s college fund as soon as they found out that they were expecting. Now, before you think that my friends must have too much money, you should know that they aren’t rich. They aren’t making huge contributions to their baby’s college fund. They just understand that their savings will have much more time to grow if they start saving as soon as possible.
Be regular. Saving for any long-term goal is much easier if you make a routine out of it. Direct deposit, for instance, is a great way to start your college savings and then forget about it. Whether you make your contributions weekly or annually at tax time, the important thing is to develop some type of normal contribution process.
Check out your state’s tuition savings program. Every state has their own program to encourage taxpayers to save for college; a quick Google search should direct you to your state’s information. Some even offer tax savings for their participants. There are drawbacks, too, however. If, by some lucky circumstance, your student ends up getting a scholarship to pay for his education, some programs will penalize you for withdrawing the money for anything other than college expenses. You’ll have to decide for yourself if the tax benefits outweigh the potential problems.
Filed under: College
A great way to increase 529 college savings is by registering it with Freshman Fund (www.freshmanfund.com). Freshman Fund is like a registry for college savings. Parents go to the site, attach their 529, create a public profile and email friends and family a link where they can contribute directly into the child’s 529 account in lieu of or in addition to the usual birthday/holiday gifts. Great for parents and great for gift givers and it’s environmentally friendly gifting.
DISCLOSURE: I’m the founder of Freshman Fund (www.freshmanfund.com). I was at my niece’s birthday party watching her tear through a pile of gifts taller than she was. At the end of the melee my gift was tossed aside into a pile of other forgotten gifts. I spent a-lot of time and money selecting her gift and I though it was a waste. I told her parents that from now on I was just going to contribute to her college savings. I asked them what website to go to in order to that and none existed. So I started Freshman Fund (www.freshmanfund.com).