When asking experts when it makes sense to start saving for college, they tend to agree Most families You need to save it as soon as possible. This is partly due to the high cost of universities, but also by the seemingly rising costs of higher education each year. By saving for college early, and by investing money to grow and compound over time, families “go ahead” in college games and have the potential to be offered along the way. Tax incentives are available.
Unfortunately, too many families are on the sidelines and do not save or do not have enough savings. College Savings in 2019: According to a survey of lessons learned from Fidelity, 42% of profiled parents want to start saving early for college, and 22% want to study more options. I was thinking.
This is all fairly common, according to Annette Vander Linde, MBA, AIF® and CWS®, Chief Client Officer of Portfolio Solutions, a $ 1.6 billion domestic RIA.Advisors say people tend to assign more importance when Start saving for college.
“I regret opening a college savings account too stressful or not opening a savings account early after birth,” she says. “The important thing is to let go of your worries for the first time.”
Whether your child is a toddler or a teenager, there is no better time to start saving for college than it is now. Fortunately, there are many ways to get started, no matter where you are and when you don’t have a lot of extra cash.
529 Open a university savings account
Daniel Milan, managing partner of Cornerstone Financial Services in Michigan, states that one of the best ways to save for higher education is to use 529 college savings plans.
“The 529 account not only gives us the opportunity to invest in the long run, but also gives us the opportunity to invest in a more tax-friendly way,” he says.
This is because the money on the 529 University Savings Plan grows over time and can be tax-exempt and compounded. You can use your account money for eligible higher education expenses without paying taxes.
In addition, some states have tax benefits to contribute to a qualified 529 savings plan.
For example, in Indiana, state residents receive a 20% tax credit on the first $ 5,000 donated to the 529 plan each year. This can be up to $ 1,000 from the state tax credit.
With this handy guide, you can find a complete list of tax credits and credits for donations to the 529 plan.
Make sure to invest in a 529 plan fund
If you open a 529 college savings plan, you need to make sure that your plan’s funds are properly invested so that you can grow over time.
Fortunately, many 529 plans make it easy to invest money in any number of investment options, including index funds and target date funds that are set to become more conservative as your child approaches college. ..
Julian Schubach, financial adviser to ODI Financial, states that it is possible to double a university savings account every 10 years, assuming a rate of return of 7%.
“The longer we can grow the money allocated for education, the better we feel when we start college,” he says.
Convert day care costs into college savings
Jim Ciprich, financial adviser to Regent Atlantic Capital, states that launching the 529 plan and making monthly donations is the best way to get started. But don’t be disappointed if you can’t promise to save for college on a monthly basis, as dependencies can improve, regardless of the amount.
Ciprich also recommends the following strategies for parents who have not yet started saving.
“When a child enters kindergarten, he diverts day care costs to college savings,” he added, adding that day care costs cost $ 1,000 a month in his hometown of New Jersey.
“Instead of sighing relief when the cost is over, consider turning it into college savings,” says the advisor.
Deposit gifts in college savings
Your kid will probably get cash or a gift card around the holidays, which allows you to easily move to college savings over time.
Jason Dall’Acqua of CFP, president of Crest Wealth Advisors LLC in Maryland, says he can ask his family to donate to the university’s savings fund as a birthday or holiday gift instead of buying a gift.
“This will greatly help your child’s education costs and the family will feel better knowing they are helping,” he says.
In addition, monetary gifts can make a big difference in your child’s life, but many children really don’t need another toy or video game.
Automate college savings
Karyn Cavanaugh of Carolinas Wealth Management states that automating college savings is the best way to make long-term progress.
Advisors recommend that you withdraw a fixed amount each month from your payment and automatically deposit it in your 529 plan.
“With automatic deposits, you don’t have the temptation to forget a month or two when your budget is tight,” says Cavanaugh. “Start with a small amount if necessary and increase your deposit over time.”
Do all families need to be saved for college?
It is always best to start saving for your goals as soon as possible, but families with limited income may not be able to save at all for college. In addition, Vanderlinde says parents should really care about their financial health before worrying about saving for higher education.
“The best gift a parent can give to a child is to ensure their financial safety after retirement and not to burden their children’s future financial support,” she says.
With that in mind, parents should make sure that before considering saving for college:
- A solid emergency fund that saves at least 6 months
- Processing of personal debt
- Plans for their own retirement savings that should help them achieve their goals
If parents line up and have a solid plan for their financial ducks and retirement, it is imperative to save for college. But before you can help others, you first need to help yourself.