Whether you are a new parent or have teens ready to think about college, it’s a good idea to start putting aside a fund if you want to make your kids’ schooling more affordable. This can help your children transition to functioning adults. There are several ways you can make school more affordable for your children.
Help Them Take Out a Student Loan
With the rising costs of higher education, you are unlikely to be able to cover the entire cost of your children’s education, so help them find other ways to make up the difference. Research both federal and private student loans, as each has their benefits. It’s often hard for students to get approved for a favorable rate when they are taking these loans out, so you might consider being a cosigner with them. This helps to gain approval faster with less worry.
Look to a 529 Plan
You may have heard of 529 plans, which are still some of the most common ways of setting up a college savings account. Usually, state governments sponsor them, and they allow you to save for educational costs that might occur in the future. Many times, you can deduct contributions to these accounts from your own state income taxes. When you take out the money to use it for educational costs, you usually will not need to pay taxes on it. You just must make sure you are using the funds for specific costs allowable by the plan.
You can usually use any state’s plan, whether you live in that state. Take some time to research the different plans because no two are the same. No matter which type you choose to open, it’s important to open it as soon as you can. The younger your kids are when you start saving, the more you will be able to set aside for them.
Research Savings Bonds
You can also start putting money aside into savings bonds, which you can purchase online from the United States Treasury. They are backed by the full faith of the United States government. Depending on tax laws where you live, you may be able to deduct that income when it comes time to do your taxes, if you use them for certain higher education costs.
Just make sure you understand all the restrictions involved with them. Savings bonds tend to be fairly low risk, so this is a great way to diversify your saving. On the other hand, they also tend to have a low interest rate, so don’t put all your savings into bonds.
Consider an IRA Account
IRA accounts don’t have to be limited to retirement savings. Roth IRA accounts allow you to invest money you have already paid taxes on, and the accounts can protect the interest you earn from taxes if you are making the required distributions. If your child decides not to attend a higher education institute, the money will already be saved for their retirement, and they can continue to contribute to the account.