If you’re a new parent, chances are money is on your mind a lot. Having a child is expensive in the present tense, but will also drain the pocketbook in the future. Paying for college is just one of the ways that your child will cost you some big bucks, and we know that sounds stressful and overwhelming for you. The good news is that it doesn’t have to be a terribly stressful thing that catches you off guard if you choose to be proactive and follow a plan.
How early? You can’t start early enough. The earlier you start, the more of a leg up you’ll have when it comes time to shell it out, obviously. If you start when your child is in diapers, even $100 a month will go a long way in paying for his or her education 18 years down the road. Whatever you do, do not delay. The longer you wait, the harder it’ll be to make it happen later without incurring debt.
Invest in Stocks
Tuition is rising drastically with inflation, so a regular savings account won’t keep up. Find a financial advisor who can help you in selecting the Mutual Funds for you to invest in specifically to save for college over however many years you have until that time. If you don’t have an advisor telling you which stocks to invest in, you should choose them yourself. A helpful tip? Choose stocks that have a solid track record for at least 3-5 years. As a rule of thumb, the younger your child is, the more aggressive you can be with your choice in stocks. If they’re over the age of 10, however, be very cautious and conservative with your selection. As they reach 15 years of age, start moving your money, a little at a time, to money markets and short term bond funds so that by the time your child enters college, you can cash out quickly.
Think about Taxes
Saving for college is not just a feat financially, but it’s guess work when you consider you don’t know how much financial aid you’ll get. This is why utilizing a tax-advantaged college savings vehicle early on is very wise. Depending on the state you live in, you may be able to save more than today’s tuition in anticipation of tuition increases, which is a huge tax advantage. This portion seems to be the most overwhelming for parents saving for college, but can be the biggest hindrance or helper. Go ahead and begin looking into tax advantages with paying for college today so that you can anticipate any bumps in the road to come.
Saving for college doesn’t have to defeat you mentally or financially if you follow these guidelines and get started as soon as you can.