Have you ever imagined what savings can do for you? Well, if you believe in regular savings, then definitely you’re aware of the probable benefits. Be it retirement or debt relief, a little bit of saving may solve most of your financial worries.
Your habits of saving may even help your kids to get into their desired college without facing any financial obstacle. Yes, the focus is on saving for college education.
Be Money Smart and Pay for Your Kid’s Education
Education has become expensive, maybe you don’t have any doubt about that. People would suggest student loans or college grants to manage the education cost, but this hardly solves the problems in any way. Grants and scholarships come up with very high eligibility criteria and student loans may evoke debts.
What’s the way out? Of course, it’s possible to manage finances to make college education affordable for your kids.
Through this article you’ll get an overview on how you may save and pay for the college education effortlessly:
1. Get Assistance in the Form of 529 plans
When it comes to saving for college education, nothing can be better than the state-controlled 529 plans. Save as much money as you can in a 529 plan and let it grow without any tax obligation. You won’t have to taxes even at the time of withdrawal. You may start your savings even before the birth of your child.
So, extended time frame and tax benefits allow huge savings to continue college education without any hitch. So, select the best plan and start saving for financial security in future.
2. Take Care of the Kiddie Tax
Kiddie tax matters when it comes to selling the Uniform Transfer to Minors Act account and the Uniform Gift to Minors Act account after their appreciation in value.
IRS has amended the tax rules recently and the latest developments allow a child to relish up to $1000 unearned income without paying any tax. Savings more than $1000 will be taxed according to the child’s tax rate.
The tax rate will match up the parent’s tax rate if the savings will cross $2000 mark. If your child is a college student aged below 24, then you must follow the IRS guidelines to pay the Kiddie tax. This will ensure less legal hassles and secure financial aid for your children.
3. Early Bird Catches the Worm
You must follow this proverb while saving for your financial emergencies. Start saving early to fulfill the financial needs on time. The annual increase of 6% in the college costs makes it even more imperative to start saving early.
Start saving considerably even if your child is in school yet. Of course, you must continue your savings on a regular basis to accumulate at least half of the total cost of a four years’ normal course at a private college.
4. Ask Your Kids to Share Responsibility
Work and study programs are effective and interactive too. You must ask your children to think about these programs. Your kids may do some part time job and save to contribute for their college education. This will not only lessen the financial burden but transform your children into responsible human beings.
5. Smart Investment may Aid You
Investment is a wise way to increase your income as well as your savings, but before you decide to invest you must learn the tactics to become a smart investor. Experienced people know how to deal with the risks, but the first time investors must not make haste in judging the probable market risks.
- Look for options with fewer risks
- Divide your savings and try various investment options
- Ask experts for a better understanding of the market
All these things will make your investment profitable and less risky. You may devote that profit for your kid’s college education.
Final Word
Practice these 5 tips to save and secure the college education for your kids. You may even get suggestions to use your retirement savings for the payment of college fees, but you must strictly stay away from doing so. You must take care of your own future along with making college education affordable for the children.
So just be wise and manage your finances well to make college education affordable by averting student loan debt.