So many parents ask me the best way to save for college. Since every family is different, and their financial situation is unique it’s difficult to give a generic answer. But one thing is certain: saving will reduce your financial burden when your teen enters college. And as a responsible parent, you should plan for this expense, just like you plan for retirement.
Many experts agree these are the two best ways to save:
An Education Savings Account or Education IRA–This allows you to save $2,000 (after tax) per year, per child. Plus, this grows tax free! If you start when your child is born and save $2,000 a year for 18 years, you would only invest $36,000. However, at 12% growth, your child could have $126,000 for college!
A 529 College Savings Plan–Look for a 529 plan that allows YOU to control what funds are in the account. Do not choose a 529 plan that freezes your options or automatically changes your investments based on the age of your child.
Both of these options offer tax savings.
If you want to see how much you should begin saving, use this easy College Costs Calculator. But, be prepared for college sticker shock. Looking at it on paper can be quite sobering.
Here are two great sites that will help educate you and your family about saving for college.
Spend some time reading all the information because all the answers can be found on these two sites. Once you know the facts about college savings you will be able to make an informed decision.
It’s never too late to start saving. And remember…Preparation Prevents Panic!
It doesn’t matter how close you were before they entered high school, the tension always mounts and the temptation is to drift apart. It takes a concerted effort on your part to stay in touch with their world. They are naturally moving toward independence and we are naturally grasping to keep them from growing up. And thus begins the ying and yang of parent/teenager relationships.