To break that down further, thats around $13K per year, per kid.
And this figure doesnt even factor into university costs.
The estimated cost of a four-year degree, 18 years out?
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Again, thats just theestimatedcost.
And there are grants andcollege scholarshipsavailable to help families chip away at the fees.
Still, these numbers can be downright scary.
Youre on a more fixed timeline.
Plus, you cant borrow for retirement savings like your child can for their education.
First, assess your total financial picture.
Take inventory of your outstanding debt, andcreate a budgetif you havent already.
5 Ways to Save Money for Your Kids College Education
1.
A 529 plan, or qualified tuition plan, is a tax-advantaged investment account.
Each state (plus the District of Columbia) offers at least one plan.
you’re able to view minimum and maximum contribution limits and other considerations by statehere.
There aretwo typesof 529 plans: prepaid tuition plans and education savings plans.
As with all investments, there are fees and risks associated with 529 plans.
Anyone can use a 529 college savings plan (no annual income restrictions!)
and you might change the 529 beneficiary to another family member without incurring a tax penalty.
Roth IRA
ARoth IRAis an individual retirement account with specific tax benefits when used for education expenses.
You fund it with money youve already paid income tax on.
you’re able to also open a Roth IRA in your childs name.
Opening their own Roth IRA is also a great way to introduce them to basic personal finance concepts.
A parent or guardian will need to serve as the custodian since minors generally cant open brokerage accounts.
With a Roth IRA, theyll get tax-free money when they retire.
They can also use these funds to help pay for their own qualified college expenses.
While your child will have to pay taxes on the earnings,they wont face an early withdrawal penalty.
This account is similar to a UGMA.
However, minors can also own property such as real estate and fine art.
A custodian will also need to be set up for this punch in of account.
Parents can set up a custodial account and then make withdrawals to cover child-related expenses.
Once the child is of legal age, the assets are transferred to their name.
Brokerage Account
Looking for more options that arent exclusive to education?
you’re able to invest in a taxable brokerage account.
Abrokerage accountallows you to invest money in stocks, bonds and mutual funds.
Savings Account
Dont forget the old standby: a traditional savings account.
Whats the best bang out of childrens savings account?
Were glad you asked!
Opening a savings account is a good start.
College is an investment, and it can be a pricey one.
With that said, dont let getting started later deter you from saving at all.
Its kind of like the Chinese proverb, The best time to plant a tree was 20 years ago.
The second best time is now.
You want to start saving money as early and regularly as possible.
Consider meeting with a financial expert to help you craft a plan thats best for you.
How much money you should save depends on a few factors.
How long do you think your child will go to school for?
(Two years, four years or more years for advanced degrees.)
What amount can you afford to regularly sock away for expenses?
Save early and save regularly, and youll be off to a good start.
She owns a content-writing business and her work has appeared in U.S. News, Clark.com and Well Kept Wallet.
Matt Mastasci contributed to this post.
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