For many of us, figuring out ways to save for a college education – whether for ourselves or our children – is a number one priority. But, balancing all of life’s expenses with putting away additional savings can be really tough. While setting aside savings seems like a big challenge, you’d be surprised how a small investment now can easily turn into a significant savings down the road – and planning ahead will help you in the long run. Here’s a look at 5 ways to save for college that leave the guess work out of how to get it done and will leave your mind at ease when those college acceptance letters start rolling in.
- Start early. Even if you just brought a new baby into the family, thinking about this savings plan now will mean peace of mind in the future. If you don’t have lots of extra cash laying around (who does?) to start a savings account – don’t worry. Even a small amount will mature. With both interest and time on your side, investing just $100/month (that’s only $25 a week) will be a pretty good sized savings account in 18 years.
- Think small rather than thinking big. While the cost of a four year education may seem totally overwhelming to you, think about the amount that you can comfortable put away. With the help of scholarships, loans and grants – a college education is often offset by some of these sources of tuition. Perhaps you can save enough to pay for living expenses each year, for example. This will be a huge help come college time.
- A 529 plan. This is a pretty common way of kickstarting a college savings as the money in this type of account can be invested. As long as the money used in the account is used for higher-ed expenses, everything the account earns over time is actually tax-free. Anyone can start a 529 – and can make anyone the beneficiary – so it’s easy to start a college fund for a child or relative.
- Municipal Bonds. While a 529 is a great option for many people, there’s lots of restrictions that make it tough for anyone who thinks they may need to use that money for something beside a college education. Muni bonds allow you to remove the money if necessary (like in the case of illness) and they are tax-free investments. They’re also known for being fairly low risk.
- Pre-paid plans. Know exactly where you plan to send your child to college? Like an in-state school for example. For some in-state residents, prepaid tuition plans are an excellent option. You can lock in the cost of tuition many years in advance – and with many of these programs, if plans change – you can transfer the balance to another school when the time comes.
Have you been trying to figure out how to save for college for yourself or your children? What’s a solution that’s working for your family?
