How to Finance Your Child’s Education: Planning in Advance
Making advance financial preparations for a child’s college education is enough to send some parents into a panic attack, especially considering that skyrocketing college costs are expected to top out at at least a hundred thousand dollars by the time today’s youth reaches college age. Fortunately, there are some simple (and not-so painful) steps you can take today toward securing your child’s future in college. Here are some tips for how to finance your child’s education by planning in advance:
Be realistic about how much you’ll need to plan for. The first step to financial planning is to figure out exactly how much you need to plan for. While it’s impossible to know for sure how much college will cost 10, 15, or 18 years from now, you can at least come up with a rough estimate by taking today’s college costs and doubling them. Do you think your child will be attending a state college, a private college, or an Ivy League university? You will also have to consider these differences in cost when determining how much to put away.
Figure out how money you need to put away each month. After sitting down to create a comprehensive budget, you may find that you can simply set aside some money each month out of your paycheck. However, it is likely that you may have to consider alternatives when it comes to putting away the amount of money you need each month to reach your goal. This is where you may need to be creative to find money sources that you might not have thought of. For example, if certain relatives give sizable donations for Christmas each year, then you may want to consider putting that gift money toward your child’s college savings, or you may even consider taking a part time job to supplement your savings plan.
Look into your state’s 529 plan. While there are a number of places you can put your money to grow it, a 529 plan is an investment vehicle designed specifically for saving up for college, and it will most likely yield the highest possible return rate. There are many advantages to a 529 plan, including tax deductions, tax-free deductions, and tax deferments on account growth.
Planning for financial aid. It’s highly likely that you won’t have to foot the entire bill for your child’s education, but again, this is where advance planning is a major necessity. While you won’t be able to put an exact figure on things like grant money and student loans, you can take measures now to help your children secure scholarships that could dramatically offset your out of pocket costs.
There are many aspects to planning for your child’s future education. Take all of these considerations into account to device a college savings plan that will work for your family.
About the Author: Alvaro Ganer spends a great deal of time working on a budget for his family. He regularly contributes to retirement funds and college savings plans while also looking at the best penny stocks online in order to round out his portfolio.
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