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College Savings Accounts

College Savings Accounts

Planning for the future of your family is something that takes time and energy. It’s certainly not something that just happens spontaneously. If you have children, one of the things you probably want to start planning as soon as possible is financing a college or post high school education. In today’s world, having an education beyond high school is gaining in importance, and with that increasing in cost with each passing year. By budgeting and planning in advance, you’ll give your kids a leg up in being prepared for their transition into adulthood.

Estimating College Costs

College Savings Accounts

College Savings Accounts (Flickr.com)

According to Financial Planner Jerry Vonwinkle, the cost of higher education continues to rise dramatically. In the 2009/20010 school year, tuition, room and board was approximately $32,000at a private college and the costs were approximately $12,000 per year at a public university. This translates into between $50,000 and $100,00 or more for a four-year undergraduate degree. Given that college costs have more than doubled in the past 20 years, you can expect that the cost for your child to attend college will be substantially higher than it is today. See : Sky Rocketing College Costs- Education Inflation

If you aren’t already saving for your child’s education, calculate how many years it will be before they graduate from high school. Select three or four different schools you think your child might potentially attend and find out what the current costs are to attend each of those schools; you can find out this information from school websites. Then multiply those numbers by two and multiply that number by the number of years until your child graduates from high school. This will give you a rough estimate of how much money will be needed for them to attend college.

 

College Financial Aid Options

The good news is that even if that number is staggeringly high, there are numerous forms of financial aid available to help parents finance college for their children. Many states offer tuition grants to first year students and federal grants are also available to students whose parents are unable to foot the entire cost of tuition.

Aside from federal and state grants, there are literally millions of dollars in scholarships available to help students pay for college. As your child nears graduation from high school, you can both begin to investigate potential scholarship programs and begin applying during their senior year. Scholarships are based on a wide and amazing range of requirements, ranging from academic achievements to ethnic background to hobbies and interests. Most colleges have scholarships available that are specifically dedicated to areas of study. Also investigate if your employer offers scholarships to children of employees. If you belong to any social organizations, such as the Elks Club, Knights of Columbus or a church, scholarship money may also be available for your child.

Student loans are another option. Although you should encourage your child to only borrow the minimum amount of money needed for college in student loans, they can be a good way for a child to finance school once they have exhausted all other options. Students should be educated about the smart use of student loan money and understand that student loans, unlike other types of debt, cannot be eliminated through bankruptcy. In some cases, student loans are forgiven if a student finds specific employment, such as teaching in a low income region or provides medical services to the needy.

Educational Savings Account

The hardest part of planning for your child’s future education is saving the money once you know how much you’ll need. Although it may seem as simple as setting aside a portion of your regular paycheck, just putting it in a savings account is not the best way to make that money work for your child’s future.

One of the best programs available is a 529 savings plan. This type of savings plan is administered by each state and provides tax deferred savings specifically dedicated to college planning. You receive tax deductions on contributions and qualified withdrawals are tax free. There are a wide variety of plans available in each state, ranging from aggressive growth plans to extremely conservative investment. You can decide how much money you are comfortable investing. Even if you are only able to invest a small amount of money, a 529 savings plan will generate better returns than a traditional savings account or CD at a bank.

Budgeting for your child’s future and setting up a college savings plan takes commitment and dedication. It can be tempting to spend money on immediate expenses. However, your child’s financial success as an adult may very well rest on their ability to continue their education beyond high school. Through careful planning and investing, you can help launch them on their way and hopefully teach them lessons in responsible fiscal management in the process.

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About Tim McMahon

Work by editor and author, Tim McMahon, has been featured in Bloomberg, CBS News, Wall Street Journal, Christian Science Monitor, Forbes, Washington Post, Drudge Report, The Atlantic, Business Insider, American Thinker, Lew Rockwell, Huffington Post, Rolling Stone, Oakland Press, Free Republic, Education World, Realty Trac, Reason, Coin News, and Council for Economic Education. Connect with Tim on Google+