Ten Ways to Save For Baby's College Starting NowKatlyn Joy | 1, November 2011
College tuition can run from around ten thousand a year to tens of thousands depending on the educational institution. If you only have one child, that's enough zero to set your pulse skyrocketing. However, ignoring the coming reality won't help. Starting from day one, imagining diplomas while purchasing diapers is a sensible solution.
1. Start with a realistic plan. If you devise an overly ambitious plan, you'll be doomed to failure with it and may become so disillusioned you give up altogether which would be a huge mistake. After learning all the options, and studying an honest evaluation of your income and expenses, allocate a do-able amount of funds to be used for education purposes for your child.
2. Take care of your money in the present. If you get yourself into deep financial waters, the educational savings will probably be the first thing cut. Therefore one of the best ways to save for your child's college costs is to manage your budget well today. Avoid debt building lifestyle choices whenever possible.
3. Set up a plan that requires a regular deposit. The reason for this is that if you set up a payment to a fund on a regular day of the month for instance, or out of each check, it will become second nature and will also not seem like a sacrifice. You won't think of that money as money you even have the choice to spend as it is out of sight and out of mind.
4. Enlist family participation. Let grandparents, aunts and uncles and other relatives know about the account and allow them to contribute as well. It may be more fun to buy bigger gifts for baby, but perhaps a smaller more reasonable toy plus a nice contribution could be possible for your family on baby's behalf.
5. Keep the accounts in your, not the child's name. Accounts in baby's name will count against the financial aid. Plus your child can turn 18 and take a party tour bus trip through Europe instead of paying the tuition at the university.
6. Get solid advice. This means discussing all options with someone skilled in such investments who does not have a slant towards any one method since they would benefit from it. Also don't just talk to cousin Howie, who is good with numbers. This is a big long term investment project that needs professional expertise to do just right.
7. Reassess your educational investment plan at least yearly. Investments can fluctuate in their value often, your income level or expense level may spike or plummet, so keep up with the plan and your current financial picture at least annually.
8. Keep up with financial news and how it affects you. For instance, certain educational savings plans may change in value if the rules running them are altered in anyway. A couple years back, some investments were capped at several hundreds a year while now they are in the thousands. It pays to stay up with such news.
9. Diversify. Don't put all your eggs in one basket. Have more than one type of investment or savings program for your child's college money.
10. Start aggressive and end conservative. When you start saving for college, you can begin with higher risk higher yield investments as your losses should they occur won't be as great. Later you'll want to be more conservative with the larger nest egg.
Some Choices for Education Savings
- Education Savings Accounts: These accounts are tax free, have flexibility in investment choices, and how to use money as you may use it for more than just tuition but related educational costs, and doesn't count against child's financial aid.
- 529 Plans: These tax free plans allow you to invest up to 0,00 a year and like ESAs will not hurt child's financial aid package. They are not a burden to figure out as the investing is done for you. Also should your child decide to ditch higher education to pursue his music career, you can switch the money to his more academically inclined sister.
- Upromise: This program takes a percentage of your online spending and diverts it to an education account. You can let friends and family contribute as well. It's a painless way to increase those college dollars.
- Savings and CDs: These conservative options can make up a portion of your investment methods to save for higher education for your baby. They are especially good for dumping in a preset amount directly before a tuition bill is due.
- Other investments: Stocks and bonds are riskier but have higher benefits if you invest wisely. Just be sure to invest an amount you can afford to lose should the worst happen.
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