If you're a parent or a parent-to-be, paying for your child's future education has probably crossed your mind. While it's true that the cost of college is on the rise, you don't have to take on excessive debt to send your child to college. By starting early and sticking to a plan, you can build a college fund that sets your child up for success.
When should you start saving?
It's never too early to start the college planning process. Many parents choose to open a college savings account as soon as their child is born. To make saving easier, schedule automatic transfers from your financial accounts or paycheck into the college savings plan of your choice. Using an online calculator can help you estimate how much you should be saving each month for your child's future education.
What are your college savings options?
Once you have an idea of how much you need to save for college, you can decide where to save the money. Consider these common college savings options:
529 College Savings Plan
A 529 Plan is one of the best ways to save for your child's college expenses. Funds in a 529 plan grow tax-free, and won't be taxed when used to pay for education costs. Another benefit of a 529 Plan is that you can change the beneficiary to another family member if your first child decides not to go to college.
Roth Individual Retirement Accounts (IRA)
Some parents use a Roth IRA to save for retirement and college at the same time. With this type of investment account, you put in after-tax money, and your funds grow tax-free. Any withdrawals for qualified college education costs are tax and penalty-free. Best of all, a Roth IRA is more flexible than some other college savings options. If your child decides not to attend college, you can still use the funds for your retirement.
A share certificate (a certificate of deposit issued by a credit union) can be a smart, low-risk way to save for your child's college expenses. With a share certificate, you earn a guaranteed rate of return when you deposit funds for a fixed length of time. The longer the term you choose, the higher the rate.
As you can see, there are many routes you can take when helping your child achieve the dream of higher education, including a combination of savings strategies. The most important thing you can do is to start early and save consistently!
If you're ready to start or grow your child's college fund, Wright-Patt Credit Union can help make it easier. Learn a lot about smart financial planning for college with this interactive learning module. Then, visit a local Member Center and let us help you find the college savings option that's right for you and your family.