Saving for College

10 Must-Read Tips to Maximize Your College Fund

Learn New Ways To Plan for Higher Education

Many people hear a lot of advice about how to save for a child's college education. And it's usually very good advice. Here are 10 things to consider when saving, that can help you long term. It's never too early to start saving; and a little saving today goes a long way toward the future.

1. Start Saving Early

The baby's born and he's so little. College seems a century away. But don't be fooled. It's never too early to start saving for your child's future education. Save just a few dollars per week, or even per month, at the beginning and then gradually increase that amount. Get into the habit now and it will soon become easier for you; you won't even miss those extra funds. Remember, you only have 18 years and the longer you put off saving, the more your child's education is going to cost you out-of-pocket.

2. Try Not to Get Discouraged by the Cost of College

It's hard not to get disheartened when hearing about rising college costs. It may seem impossible to save what you will need to pay for four years of school. But the trick is to stick with your savings plan and little by little that money will grow. Just remember to develop consistent saving habits and the rest will take care of itself.

3. You Can't Always Depend on Financial Aid

You may think that, in your tax bracket, your child will qualify for financial aid, but that isn't always the case. Plus, your financial situation may get better and if it does, what will happen then? If you put money away, this won't be a problem. But if you don't, you may have to come up with some cash very quickly.

4. Research More Ways to Save Money

There are many ways that you can save money. First, check out existing tax breaks such as the Hope Scholarship and the Lifetime Learning Credit. Other tax deductions or tax credits for paying college tuition or funding a 529 account can also help you save. Another way to save money is to prepay your child's tuition so that you will be assured of a lower fee for all four years.

5. Consider Well-Endowed Private Colleges

Even though a state school may seem less expensive, private colleges and universities are often much better endowed and, for that reason, may be more generous with financial aid packages than you would expect, even when you have a fairly good income.

6. Check Out Other Sources of Funding

There are a multitude of grants available and all it takes is a bit of research to see if your child qualifies. You could find a grant that will keep you from having to take out a loan.

7. Try Putting Savings in Your Child's Name

Some 35 percent of the savings that are in your child's name need to be used before she can qualify for financial aid. That isn't true if the savings are in your name, since those are considered your assets.

8. Look Into a College Savings Plans

A college savings plan like a 529 plan or a Coverdell ESA are both good ways to ensure that your money will grow. Similar to Roth IRAs, contributions to the account are not deductible and the fund is tax-free. And you can withdraw the money tax-free when you use it for higher-education expenses.

9. Try To Avoid Picking Risky Investments

You will have only 18 years to come up with college funds, so it's much wiser to pick conservative investments. Try to choose investments that will bring in the most income with the least risk.

10. Your Retirement Fund is For Your Retirement

Tapping into your own retirement fund for your child's education means that you may not have enough money to retire when you want to. In addition, you will have to wait longer to retire. Try to find another way if you don't have the money in hand. That could mean student loans, which will allow you to finance your child's education at a smaller interest rate if you take out Federal loans.

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