If you’re like many parents, you want your child to go to college. Paying for their education however, can be a huge financial burden. As tuition costs climb each year, saving early is an important step for parents. Here are five tips to help you save for your child’s college expenses.
Estimate the cost of college
According to a U.S. News annual survey2, the average annual cost of tuition and fees can range from roughly $10,000 to upwards of nearly $37,000. And those costs are increasing every year. Not to mention the often overlooked expenses including books and room and board. Like any goal, determining how much you need and when you need it will help you plan. You want to consider things like how many children you have, which schools they are likely to attend and when. To estimate projected costs, you can start with a comprehensive college savings calculator3 that will guide you and include all of the costs associated with college.
Bridge the cost of college
As you plan your savings timeline, you may find you have a college savings gap. To bridge that gap, see if you are eligible for tax credits and funding assistance such as financial aid and loans. You can also set up savings funds like the Coverdell Education Savings Accounts and 529 Plans. Family members can contribute to savings for your child with the Uniform Gifts to Minors Act that allows for financial gifts to minors – all of which can offset your shortfall, but should be considered carefully with the help of your personal tax advisor.
Open a 529 early
Although a 529 Plan is not without some restrictions and fees, this state-sponsored, tax deferred college savings plan is flexible and could help you save more over time. These investment plans offer tax-deferral on earnings and income tax-free withdrawals for qualified college expenses. Some states even allow you to deduct contributions from state income taxes. The earlier you open one, the more you maximize long-term potential savings growth.
Encourage family to gift savings
You can encourage help from family and friends. Ask them to gift an amount to your child’s college fund rather than buying toys or gifts for birthdays or holidays. Over time, their contributions can add up.
Encourage kids to contribute to college
It is also important to encourage your child to save and invest in their future. Asking your child to contribute in small ways to their own college fund will help them learn the value of money and the importance of saving and may help them to become invested in their own education when the time comes. Remember, building savings takes time. As you look for more ways to save for college, be sure to budget for all of your competing savings goals. Be sure to save early and save often, so you can provide for your loved ones, and live the life you’ve envisioned.
Neither Voya nor its affiliated companies or representatives provide tax or legal advice. Please consult a tax advisor or attorney before making a tax-related investment/insurance decision.