Saving for your child’s future has never been more important as the cost of higher education continuing to soar. The first question many parents have is: “When should I start saving?” A good rule of thumb is to begin saving as soon as your child has a social security number. If you don’t have children yet but are expecting or planning on having children in the near future, it’s never too early to start putting money aside in a savings account.
Evaluate the Costs
“How much will college cost for my child?” The answer to this question can help you create a realistic savings goal. Your answer will likely depend on a variety of factors, such as where your child goes to school and when. According to Forbes, the current average cost of attending a four-year public college is over $28,000 per year while private colleges are averaging around $59,000 per year. Surprisingly, the price of tuition is only expected to increase the average cost is projected to be around $36,000 for a four-year public college in 2020; by 2030, that number is predicted to double.
Ready, set, save! There are a variety of ways to start saving for your child’s college education. For example, according to U.S. and Money News, a good tactic is to put any monetary gifts that your child receives into the savings account. Whether it's money from a birthday, Christmas or graduation, it’s a good idea to place any cash or check your child receives from friends and family into a college savings account. You could even ask for contributions to the account as opposed to a physical gift. Setting up automatic contributions is another excellent way to set money aside for college. Even if it’s only $25 per paycheck, every little bit will add up, especially if you increase your contributions annually.
Open a 529 Savings Account
A great resource to help save for college is a 529 college savings plan. According to Mic, a 529 plan is a savings plan that offers income tax breaks and was created in 1996 by the IRS to assist families in setting aside money for future college costs while their children are still young. Anyone who plans to attend college can be designated as the beneficiary of a 529 plan. The account owner, likely a parent but not the beneficiary, controls the account and makes all of the investment decisions. Family, friends or just about anyone can contribute to a 529 plan, regardless of their income, but contribution limits vary by state. The 529 plan’s earnings accumulate tax free, and withdrawals are federally tax-free and penalty-free as long as they are used at an eligible educational institution.