It doesn’t take a degree in finance to know college is expensive.
And, with the cost of college on the rise from one year to the next, the sooner you start investing in your child’s college, the more savings you’ll have to show for it. So, what are some key steps to investing in your child’s college education?
1. Involve Your Child
If your children are still in their diapers, then it might be pretty difficult to include them in the college savings conversation. But, it’s never too early to teach your kids the value of a dollar.
So, once they’ve graduated from children to young adults, it’s time to teach them how to save money and spend wisely. For example, if they receive an allowance, have them save half. The sooner they realize how much work is involved with finances, the more they’ll appreciate their college experience.
2. Your Finances Come First
It may sound harsh, but your financial security is more important than your child’s future college fund. After all, if you invest all your money in a college fund, you won’t have any left to raise your kids or enjoy your golden years.
So, stay away from your retirement funds and keep in mind that low-interest student loans are always a possibility. Likewise, there are work-study programs and scholarships available for your children, but there’s no such thing as a retirement scholarship for you. It is important to focus on your education in order to be able to obtain a career that can provide financial security. Women who have children often tend to work towards jobs that offer schedules with flexibility. The flexible availability is nice due to the unexpectedness that comes with having a family. In order to find a position that allows this type of flexible schedule one must look at the available jobs and then decide which educational path is right for them. With technology becoming more and more prevalent, working mothers can take online courses to further their education. Lawyers, Nurse Practitioners, and Chief Executives make up some of the highest paying jobs for working mothers.
3. Investment Mistakes
Knowing what not to do is just as important as knowing what to do when investing in your children’s college education. So, take a cue from successful financial consultants like investor Steven Spinner and put your money in the right place.
That means using IRAs for retirement purposes only and staying away from mutual funds and annuities for college savings. In fact, there are specific college savings plans available for parents in search of safe and secure college investments.
4. College Savings Plans
When it comes to college savings plans for your children, the most widely used and trusted plans available are 529s. Almost all 529 plans are available in two different forms — prepaid tuitions and standard savings plans.
Regardless of which plan you choose, all contributions grow tax-deferred and any money taken out for educational expenses is tax-free as well. And the best part is, most 529 savings plans are flexible meaning you and your children aren’t limited to which colleges accept the funds.
5. The Sooner, the Better
Investing early in your children’s college career will pay off more in the long-run. So, start saving the second they’re born and watch your children’s college savings really grow.
Depending on the annual return, you could have the first two years of tuition covered before they even graduate high school. And remember, even the most modest investing is likely to grow tremendously over an 18-year period.
When it comes to affording your children’s college education, follow the steps above and you’ll come as close as possible to a debt-free graduation.
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