The cost of raising kids has gone up, and if you are planning on helping them afford college, now is the time to begin saving up. There are several things you can do to set money aside for the future, even if your kids won't go to college.
Reducing Your Monthly Spending
Saving for your child’s education isn’t something that will happen overnight. Instead, you’ll want to set aside a specified amount each month. It might take some rearranging your budget to make it work, but there are a few ways to make this work. If you have a life insurance policy, you might consider selling that through a life settlement. Then you will receive a lump sum, and you will no longer need to make payments on that. If you are thinking of going this route, you can review a guide that explains the process.
Plans to Save for College
You might consider a 529 college savings plan for your child. It has certain tax advantages, so you won't have to pay taxes as the funds start to grow. Plus, you can take it out without paying taxes. There are certain contribution limits, and each state’s plan is different, so do your research before setting on up. You can also turn to a brokerage account if you don’t want an education-only option. These are taxable, but allow you to invest in bonds, mutual funds, or stocks. After depositing the funds, you might work with a financial advisor to grow the funds.
These often offer more flexibility since you can pick from several types of investments. Plus, you can withdraw the funds at any time. It can be a good option for parents who do not know whether or not their children will go to college. Still, know that the funds can be considered when determining how much financial aid your child gets, so it could reduce the amount they receive in scholarships. Savings accounts are another option, even with the current low interest rates. Still, they are insured by the FDIC, and they are a safe option for storing funds. Many banks offer options for those under 18, and some have better interest rates.
Getting the Kids Involved
You might want to encourage your kids to ask for money toward educational expenses rather than traditional birthday or Christmas gifts. This is a great thing for family or friends to send your child. The earlier you can begin the process of investing, the more time the money will have to grow interest. You can also encourage savings on the part of your child. Once they are old enough to work, even if it is just doing some odd jobs, they can get a job to begin saving toward their college fund.
Money management is one of the skills students should learn to be successful so why not get them started as soon as possible. Even if they aren’t getting a lot of money, they can still set enough aside to make a difference. You could also encourage them further by matching a certain percent of what they save. For example, if they put aside $10, you could give them a dollar.