Five Smart Ways to Save Money for Your Child’s Education

Your child’s education funding plan is the most important part of your financial planning. And if you want to go to college without ending up with crippling student loan debt, then you need to be proactive and have a game plan in place to save wisely enough to afford tuition. But do not worry; here are five powerful processes that will help you save for your child’s future without burning a hole in your pocket.

Early Savings Plan: The sooner you start saving, the better. Compound Interest: The Most Powerful Worker in the Realm of Saving Time is both your best friend / your worst enemy when saved over time. It may even be worthwhile to open an education savings account for your child the second they are born. Small, regular contributions can really add up over 18 years. College 529 savings plans are made for people who save for college savings. Both of these plans offer tax-deferred growth of your contributions, and there are no taxes if the money is withdrawn for higher education expenses. While TDFs are simple, direct ways to start investing within a designated time frame, with a 529 Plan, you generally get more control of the funding because it is a type of trust that is opened with your name as a contributor and usually under your control, making it easy to add or withdraw funds.

Utilize Life Insurance Benefits: While not something immediately thought of as a traditional College Savings tool, specific types of life insurance can be a huge asset. A lot of new investors are sold a whole life insurance policy and are told that it not only provides death benefit protection but also accumulates cash value over time. This cash value can be borrowed or withdrawn to help pay for college. There are benefits such as tax-deferred growth of cash value and tax-free access, depending on how the policy is managed.

Use Gifts And Windfalls: Instead of getting traditional gifts, backpacks, or toys for your child, you can encourage family members to contribute to your child’s education fund. During birthdays, holidays or other special occasions, grandparents or relatives could opt to also contribute to a 529 plan or even a dedicated educational savings account. This also applies to windfalls—from tax refunds and bonuses to plain-old great luck—forces solely dedicated to paying for a college education over time add up considerably.

Hire a Professional Advisor: Navigating the complexities of financial aid, scholarships, and savings plans can be overwhelming. Opportunities exist to hire a college financial advisor to handle the planning of educational expenses. These are the people who can help your student fill out financial aid forms such as the FAFSA, find scholarships and grants, and advise him on minimizing debt. Yes, hiring a professional costs money, but the money saved by not having to pay the full retail price or by increasing financial aid packages can far exceed that initial cost.

Search for Scholarships and Grants: Scholarships and grants are free money to help pay for college expenses and even non-tuition costs. Urge your child to access scholarships from day one of their high school career. Scholarships are offered by many organizations to students who meet certain criteria related to grades, sports and arts abilities and involvement with the community. Even small scholarships will add up over time to decrease the amount you pull from savings or loans.

Community and Local Scholarships: Sometimes forgotten by students, local scholarships also generally have smaller applicant pools which can benefit your child. You can start by asking your local business, your local community, and guidance offices in your school.

Additional Tips for Maximizing Savings

More Tips on Getting the Most Out of Your Savings

  • Automatic Savings: Schedule automatic transfers to your savings account as soon as possible after you get your paycheck. It works great because saving money here happens before you ever have the chance to spend any extra cash elsewhere.
  • Cut Costs: Find areas to save on, and spend that money on your child’s education savings. It could be as simple as selling or trading in for a more affordable car, eating out less, or cancelling some subscription services that you don’t really need.
  • Make More Money: Think about some part-time or freelance work that will earn you some extra cash. Just a few extra hundred dollars a month can drastically change your savings rate.
  • Keep up to date: The tax rules and financial products change the whole time. Check news about the tax benefits of 529 savings plans or other products that may benefit your strategy.

Resourceful savings for your child’s education, quite a good deal to keep saved with planned savings through persistence and a proactive attitude. These four tips will help you reduce the cost of college and afford the educational opportunities your child deserves.

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