Saving for your child’s college tuition is very important. There are several options available that can be started at any time.
First, start saving money! You can do this before you decide on a specific plan. Open a savings account and put money aside as often as possible. For some, that’s once a month. For others, it’s whenever you get extra cash.
Types of Savings Accounts and Plans
There are a variety of savings accounts and plans available, including and not limited to:
- 529 Prepaid Tuition Accounts: You put money into these accounts to cover the current cost of state tuition (either in a lump sum or a monthly payment plan). When your child is of college age, the account is used to pay their tuition. If your child decides to go to a college or university out of state, the program pays the comparable amount.
- 529 Savings Account: This is like any other savings account, with the interest rate being comparable to current stock interest rates/returns. There are good tax advantages to these kinds of accounts.
- CDs (Certificate of Deposits): These are similar to saving accounts. You buy the CD, and it grows on a variable interest rate.
Each family has different needs, it's important to talk to your bank, financial planner, or institution you choose to save with. Contributions may be state-tax deductible. Thirty-four states and the District of Columbia
allow you to deduct some or all of your contributions. Rules vary, so check with your state for more details.
In addition to savings accounts, there are other ways to help you pay for college:
- FASFA: The year before your student heads off to college, you can fill this out for grants as well as for government and private loans. For most students, the amount awarded is based on the parents’ income. Even if you do not think your student will be awarded anything, it is worth going through the process.
- Grants: Grants can be awarded through FASFA, but there are also private grants that you can find from surfing the Internet and talking to financial aid counselors at your student’s college or high school. There are thousands of dollars each year in unused grants.
- Scholarships: It can also be tedious to fill out scholarship applications and write the essays. However, the end results could really pay off. Scholarships can be found online, as well as through your high school or college. Many banks and other businesses offer scholarships to deserving students, so ask around.