The Best Way To Save For Your Children’s Education
Getting Ready for Higher Education
You'll want your kids to have the best education that money can buy, but expenses for school and college can be high. In fact, the money you spend on your children's education might be one of your family's largest expenses.
Beginning to save early can help you ensure that your children can afford the best education.
- Determine the Amount You Need
- Evaluate Your Options
- Teach Your Kids About Savings
Determine the Amount You Need
The amount of money you'll need will vary based on whether you want your children to go to public or private schools, and whether they intend to go on to college.
If you send two kids to a private high school, and it costs around $20,000 per year per student, by the time they each graduate you'll find that you've spent $240,000 on fees for school. This isn't counting extra expenses like trips, school uniforms, sports and more.
Public school can be a great deal less expensive, but there's still tuition fees for any extracurricular subjects, some of their books, camps, sporting events, and possibly school uniforms to pay for.
The cost of your child going to college may also vary greatly. Even if they obtain a scholarship, they'd still have to pay for books and materials, membership fees, and transportation. Reach out to the university your child may be attending to get an estimate of how much these things will cost each semester so that you'll know how much money you have to save.
The sooner you can begin saving for your child's education expenses, the better. These types of costs are often a goal that can take several years to achieve, so it's important to start as early as possible.
Evaluate Your Options
As you work towards your goal, you may want to consider putting your savings in:
- Managed Funds
- A Savings Account
- Term Deposits
- Education Savings Funds
Consider your other financial obligations and how much debt you have before you make the choice to put your money into any of these options. You may be better served by paying down your debt or paying off your house before you begin saving for education.
Smart Tip: Don't feel pressured to sign up for any type of account. If you're ever approached be a representative, take the time to carefully read all documents for the savings plan.
Education funds are special funds that help you to save for education. If you're thinking about using one, you should look into the following to be sure that they fit your overall financial plan.
Ask yourself these questions before investing:
- What fees will you be charged?
- How much do you need to invest?
- How often do you need to put money into the fund? Can other people contribute, like the children's grandparents?
- What are your options for investing?
- Do the time frames for these investments meet your children's financial needs?
- What can you use the savings for, exactly - primary school, high school, college? Can you use them for school trips or clothing?
- What are the prerequisites for gaining access to the fund? What if you stop contributing - do you lose your investment? What do you do about withdrawing your money if your child's goals change?
Compare the features of these funds with other types of investments.
Have you heard of a 529 Plan?
This is a savings plans designed to encourage savings for higher education, that offer a tax advantage. They are legally known as Qualified Tuition Plans and are sponsored by U.S. states, agencies, or institutions.
There are two types of these plans: education savings plans and prepaid tuition plans. All 50 states plus Washington, D.C. have at least one type of 529. Numerous private colleges also have prepaid tuition plans.
Teach Your Kids About Savings
Be sure your children know about savings. Make sure that they understand the benefits of saving money for long term goals. You may even consider opening a savings account and teaching them how to use it.
Education is vital, but also expensive. There are a variety of things you can do to help ensure that your child can have the education you want for them.