One of the items that should not be missing from any parent’s child care agenda is saving for college education. Many experts are in agreement that college education plays a vital role in developing human capital. According to estimates, by 2018, a large percentage of jobs in the United States will need some degree of post-secondary education.
The cost of higher education is rapidly rising and it has created an obstacle to college education access and completion particularly for low and moderate income families. As such, it is becoming increasingly important to start saving for children’s college fees as early as preschool when they are still in the daycare stages. Herein is a simple and comprehensive guide to get parents started.
The first step for parents would be to understand the importance of savings and the repercussions of not doing so. Saving for college ought to be viewed as part of an encompassing program that includes loans, scholarships, awards and work study. College savings accounts complement core curriculum frameworks and other strategies that aim to increase educational attainability.
Saving for college also indirectly affects the direction which a child’s elementary and secondary education takes. It will change the overall outlook, high school course selection, discipline and academic performance since there is a prior analysis of the end goal. Additionally, saving will help avoid depending on student loans which lead to debts.
There are multiple platforms available to save for college and each has its own benefits. Research shows that currently, most parents save for college using general savings accounts. The other alternatives include state college saving (529) plans, Coverdell Education Savings Accounts (ESAs), investment accounts, juvenile life insurance policies and online savings accounts.
All these alternatives cater for varied income brackets. The most widely available and recommended plans are 529 plans. 529 plans are savings plans operated by states or educational organizations and help meet the costs of college education all over the country.
Almost all states have at least one 529 plan. It is important to note that the plans will be different depending on the state. Parents should inquire about the specifics of each plan prior to investing.
They can use this information to compare different plans. Federal tax law offers special tax benefits for 529 plan participants and numerous states provide tax incentives to investors. These plans can either be prepaid or savings plans.
A significant number of parents make plans for saving but the actual savings becomes a problem. One of the major reasons that families cite is that they lack enough funds to save. This is reported mostly in the lower income families.
A good way to go about this is a restructuring of the monthly budget. Ideally, they should actually live on what is left after saving if possible. This is the only way around this if extra sources of income cannot be found. Other barriers to saving for college are expecting children to qualify for adequate financial aid and procrastination.
It is important for parents to understand that the earlier they begin saving, the more time the funds have to grow. This will bring them one step closer to securing their children’s future in times of economic crisis.
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