When your children are born you probably aren’t thinking about how to create a college savings plan for your children. It seems too early, but the reality is that college expense are higher every year and it is never too early to begin saving.
How To Create A College Savings Plan For Your Children
Start early with a dedicated savings account. Once your child has arrived, even at only a few days old you can create a dedicated savings account just for their college fund. A $5 per week savings for 18 years can bring that savings account to $4680. While that doesn’t sound like much compared to the cost of college per semester, adding in the occasional larger deposit and interest earned over the years you can make a huge dent in college at even only $5 per week. Start early and you will have even longer to allow that interest to build and create a college savings plan for you children that will offset their expenses.
Choose an interest earning savings account. Make sure that whatever you put into savings is making you money. Put this money into an interest earning savings account, and regularly check to make sure you are getting the best rates available at the time. Switching banks may happen from time to time over the life of your child, and that can be to your financial benefit. Always keep an eye on interest rates and options that will improve your rate of growth.
Designate part of your tax refund each year toward college savings. Many parents find themselves in a tax bracket where a child credit means they receive a tax refund each year. If this is the case, designating 25% of your tax refund (at minimum) toward your kids college savings plans can be a great choice. If you have multiple children, you can divide that equally between their accounts. This is a great way to add thousands of dollars to their funds over the years. If you are able to add $1000 per year from your tax refund, you already have $18,000 in savings.
Purchase savings bonds. This is an old school method of savings that is still relevant. It may not have as good a dividend as other savings methods but it can be beneficial.
Match gifts. One way to help create a college savings plan for your children is to do something similar to matching gifts. For birthday and holiday gifts, you can do a couple of different options in matching a gift in savings. You can set a budget for their gift, and use 50% for the gift itself, then put the other 50% into their college savings. In essence, you have built in an automatic gift that keeps on giving. Another option if you are financially able to do so is to match the amount you spend on their gifts with an identical monetary deposit into their college savings account.
These are some simple ways to create a college savings plan for you children. Being able to save consistently is the most important thing you can do to help build their savings. Follow these tips and you will find your kids able to attend the college of their choice thanks to your savings skills.
Have you created a college savings plan for your children yet?