3 Tips to Make Saving for Your Kids’ College Fund Much Easier
We all know that funding someone’s higher education can be a very expensive proposition. College tuition is rising at a staggering 8% per year while the average bank savings account pays less than 1%. So just saving money in a bank account won’t work. Here what you need to do.
Money grows with time, the more time the better. Some people start saving for their child's education when the child is still a toddler. Because the child will be the "beneficiary" on the account, it's important that they have a social security number before opening the account.
Pick A Plan
The government wants people to invest in their heirs college education so they have offered tax savings for doing so. The basic idea is the IRS will defer charging you taxes on the growth of your plan until your child actually attends college (withdraws the money). Some plans may not tax the plan at all. Basically their are three basic plans available: 529, Educational IRA, and prepaid state plans. The prepaid plans will sometimes freeze the tuition at today's rates. Talk to your financial adviser for details.
This part can be confusing to the beginner. Although, many average Americans are frightened with the idea of investing in the stock market, a good financial adviser can make it easier to understand. It's important that you invest the money in something that pays more that a savings accounts (for reasons mentioned above) You can find them online. Note: Financial Advisers come in all kinds of shapes and sizes. Shop around.