How to save money for your childs college fund

Parents wanting to put their children through private college education are expected to shell out $50,000 a year excluding other school-related expenses like books, room and board and allowances. It will take decades’ worth of savings before your child could start college.

Here are some tips to help you ease through the hurdles of saving up for your child’s college education:

• Have a concrete savings goal

  Create a long-term savings goal to help you have a clear direction on how much you want to set aside for your child’s college fund. Instead of spending on lunch outs everyday at the office, make your own lunch and put the money towards your child’s education. It may not make a big dent but when you actually add the amount you’ve saved, it makes a whole lot of difference.

• Stay focused on your goals

  Don’t just easily give up and lazily explain yourself away when you think you can’t meet your savings goal due to unexpected financial bumps. Do something about it. You can initiate a garage sale, work overtime or cut off your cable in the meantime. Maintain that focus and regularly make contributions to make it seem less painful. You can also utilize an expense spreadsheet tools that can help you assess your weekly, monthly and yearly expenses.

• Shop around for the best education savings investment vehicle

  There are several options to choose from. Evaluate the fees involved, investment methods, potential returns and your risk tolerance. Make sure that you include the details on the performance of each investment plan from the past to present. You can discuss with your financial adviser on what type of investment vehicle is right for you. Some examples:

  • Bank Accounts – Parents who opt to go traditional can use the savings facilities from banks. It’s relatively very safe but interests are considered the lowest and are not entitled to tax breaks. It will also be fully eroded with the effects of inflation.

  • 529 College Savings Plan – Offered in different states, 529 plans provide tax-free returns to investments derived from emerging market stock fund to cash-like fund accounts. Considered one of the best options to save for college, anyone can open it and the money withdrawn to pay for college costs is not taxable. It has two types: the prepaid tuitions plans and the college savings plan. The first option allows families to pay their children’s tuition fees in advance at today’s value. When tuition fees increase, rates remain the same. Unfortunately you can only use it at the institution where the plan was created for. The second type is not fixed on the current tuition rate, but will give them flexibility to use the plan to any accredited colleges and returns on deposits can accumulate tax-free when allotted for higher education.

  • Other Accounts – This include Custodial Bank or brokerage accounts with no tax breaks opened on behalf of the child or Coverdell Education Savings Account.

Even with college costs rising, by just using some common sense and employing the right financial strategy, parents can face huge expenses and secure their children’s education head-on.

Start now with your expenses spreadsheet.