Whether it be a piggy bank full of coins or a savings bond, most parents like to get a college fund started for their children as soon as possible.
Doing so helps reduce the financial burden that comes with your child's path toward obtaining a higher-education degree. Not only does this save your checking account from high student loan payments, but it also puts your children in better financial standing once they finish school.
While stashing money in a coffee can may be a good way to start saving, it isn't the best strategy for maximizing the available funds once the first semester starts.
Here are four tips to get you started:
- Early saving: Like setting money aside for retirement, starting a college fund is a task that should begin as soon as possible. Even if you don't have children yet, you can start putting away money for their college expenses. Imagine you start saving two years before your first child is born and put away $50 each month until your child is ready to head off to school. With principle alone, you could have $12,000 saved by that time.
- Bonds: There are various types of bonds you can use to save money for a college fund. We offer callable, corporate, coupon, government and municipal bonds. Review these options to determine which one has the interest and tax benefits that best suit your needs.
- 529 Plans: These are savings vehicles offered through an educational or state institution. There are special tax benefits for eligible 529 plans, the recipients of the funds can go to any school they want and several benefactors can contribute to the plans.
- Prepaid tuition: This strategy is useful if you know your child is going to attend a state school. When you prepay for your child's tuition, you get to lock it in with current prices. Given the rising cost of college tuition, this option can help you start saving now before inflation further drives up education expenses. There are some caveats to this plan. First, you may pay a little more than current tuition rates. Plus, there may be repercussions if your child decides against going to a state school. In some cases, you'll have to pay a cancellation fee, and for other schools, you may be able to recover only a small portion of your contributions.
For more information on effective wealth management strategies, contact Landmark Bank.
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