With the cost of a college education rising on a yearly basis, it is not easy for most college students to pay for it. For this reason, both the parents and the students need to start saving early so they are ready financially when the big day arrives. Here are seven ways to save for college.
1. Start at birth. While this tip may be too late for some, ideally, as soon as your child is born, you'll start setting aside a certain amount of money each month for his college education. Choose an amount that you are comfortable with and that you can afford. Even as little as $25 a month will make a big difference when he is ready to start college in 18 years.
2. Use money market accounts and CDs. Once your monthly deposit has grown enough to get a money market account or a certificate of deposit (CD), take care of it right away. These accounts always yield more than a regular savings account, and your money is much safer than if you purchase stocks or mutual funds. Check online for banks that offer the best interest.
3. Take advantage of extra money. Start teaching your child to save from the time he is quite young. Show him how to deposit a certain percentage of any monetary gifts that he receives into his college fund. You can do the same with any extra income, such as your annual tax refund or year-end bonus. Little by little, you will see the college fund account begin to grow.
4. Sign up for a Upromise account. Upromise is a free, online program to help you set aside money for your child's college education. You register your credit card(s) and any store cards that honor Upromise. When you go to a restaurant, a certain percent of the total amount will automatically go into back your Upromise account when you use the registered card. You can get a similar savings at grocery and drug stores when you use Upromise's eCoupons. Likewise, if you want to shop online-and access affiliated online merchants via the Upromise gateway, using the designated credit card for purchase-you'll reap the savings.
5. Ask family members to help. Talk with your closest family members, and ask them to register with Upromise so they can help you save money for your child's college education. They also may be willing to contribute to your college savings fund directly. Some grandparents may prefer to set up their own college fund that they'll pass on to your child when he's ready to go to college. Check with your accountant on the various tax benefits and financial-aid considerations relating to any of these possibilities.
6. High-school students can save for college. When your child reaches high-school age and gets his first job, encourage him to start saving for college. At least 50 percent of his wages can be set aside. This is a great way to teach him how to take care of his money, too. Many financial-aid formulas take into account a student's own savings, so check with a high-school guidance counselor, a college admissions representative or a financial expert on how best to set money aside to allow you to qualify for as much financial aid as you'll want.
7. Get a second, online job. Places like Tutor.com or Helium.com are great places to earn extra money that can be saved entirely for college. Tutor.com pays its tutors up to $15 an hour to work with students from kindergarten through college. If you have a knack for writing, you can pull in a paycheck twice a month at Helium.com for writing online articles.
Again, because saving up is hard to do, talk to an accountant, banker or financial planner about these and other ways to save for college. A professional can help you choose the best methods for your situation, help you avoid tax liabilities and work effectively with the financial-aid system.
529 college savings plans are popular methods to save for college, and offer many tax benefits that make them attractive to savvy investors. Unfortunately, 529 college savings plans aren't foolproof; a downturn in the economy has just as much impact on these plans as other stock market investments, and renders them far more volatile than traditional savings accounts. Is a 529 plan right for you?
When you start saving for your child's education with a 529 Plan, you cannot predict what she will want to be when she grows up. Luckily, 529 Plans do not go to waste if your child chooses a path in life that doesn't involve a stop in college.
There's only one great way to save for college: with a 529 plan. This plan, named for the section of the Internal Revenue Code that created it, is a type of investment account.