Funding a college education is a significant financial undertaking. In the past 20 years, private college tuition has gone up 133%, and public, in-state tuition has gone up 202%. With numbers like these, it’s hard to know where to start with saving for future college costs, but we can help!
Here are 9 ways to fund a college education:
1. Start early and set clear goals
Time is your ally when saving for college. The sooner you begin, the more time your investments have to grow. Set clear goals for how much you’d like to contribute by the time your child enters college. Having a target in mind can help you create a realistic savings plan.
2. Understand 529 accounts
529 accounts are state-sponsored education savings plans that offer tax advantages when used for qualified education expenses. There are two main types: college savings plans and prepaid tuition plans. College savings plans allow you to invest in various portfolios, while prepaid tuition plans let you lock in today’s tuition rates for future use.
3. Take advantage of the tax benefits of 529 accounts
One of the primary benefits of 529 accounts is their tax advantages. Earnings within the account grow tax-free, and withdrawals used for qualified education expenses are also tax-free at the federal level. Additionally, some states offer state income tax deductions or credits for contributions to their sponsored 529 plans.
4. Use your 529 account to cover expenses
529 accounts can be used for a wide range of qualified education expenses, including tuition, room and board, textbooks, and even certain technology expenses required for coursework. This flexibility ensures that your funds can cover various aspects of your child’s education.
5. Consider your 529 account for estate tax purposes
Contributions to 529 accounts can be considered gifts for estate tax purposes, allowing you to reduce your taxable estate while still retaining control over the account. Gifting large amounts at once or utilizing special rules can provide even more advantages in terms of estate planning.
6. Encourage family contributions
For special occasions like birthdays and holidays, encourage friends and family members to contribute to your child’s 529 account instead of giving traditional gifts. This can significantly boost the savings over time.
7. Set up automatic contributions
Setting up automatic contributions to your child’s 529 account makes saving for college a seamless part of your financial routine. This approach ensures consistent contributions and eliminates the risk of forgetting to save.
8. Research scholarship opportunities
While saving is crucial, don’t forget to explore scholarships and other supplementary funding opportunities for your child. Explore potential financial aid available through Free Application for Federal Student Aid (FAFSA), which provides wide access to federal grants and loans.
9. Consider other investment vehicles
While 529 accounts are tailored for education savings, you might also consider other investment vehicles, such as Roth IRAs and even brokerage accounts, to diversify your approach to funding higher education.
Funding your child’s college education requires careful planning. Working with a trusted advisor, like our team at Family Wealth Solutions, you can rest assured that you’re making the best decisions for your family’s future. We understand that every family’s situation is different, which is why we take a personalized approach to help you maximize your savings and provide your future college student with all the opportunities they deserve.
Give us a call today to learn how we can help you secure a bright future for your family.