Being a parent means making hundreds of important decisions. You have to choose a doctor, purchase the right home, pick the right school… The list goes on and on. “How should we save money for college?” is one question that many parents have. The price of college tuition is incredibly high and is expected to remain expensive. This article will help you decide how you should save your money. Keep reading to find out some of the best tips for saving for college.
Start Early And Add Funds Often
Parents who start saving early see the best results with their money. In fact, it’s never too early to start saving. Even if you are only thinking about having children, it doesn’t hurt to start saving. The more money you have in the bank when your child enters school the less he or she will have to borrow. Also, when you start early the savings’ earnings will help fund the account over time. If you wait until your child is in high school, though, you’ll end up having to contribute more to the fund.
529 Plan For College Savings
The most popular college savings plan is a 529 plan. Up to 12 million families in America use it. The money that you put into the plan grows without tax fees. When the money from the fund is used to pay for college, you don’t have to pay income taxes either. You will face taxes, though, if you use the money for anything besides college tuition and related expenses. There are two different types of 529 plans: prepaid tuition plans and college savings plans. Visit this page to learn more about 529 plans.
How Your Savings Affect Financial Aid
Even if you have a sizable college savings fund, you should still fill out the FAFSA (Free Application for Federal Student Aid) every year. The application takes into account your family’s income and savings, and it will determine how much you have to contribute to pay for education. Assets owned by children, like a Coverdell Education Savings Account, are assessed at a higher rate than parent’s assets. FAFSA doesn’t assess 529 plans owned by a grandparent until the funds are used to pay for college expenses.
Know The Law
Lawmakers are aware of how expensive college is, and many of them work to reduce the cost through different laws. It’s important to keep up with both the federal and state laws that relate to college tuition. Some states have different guidelines on how 529 plans can be used, how much money can be contributed, and other related details.