As with any big, expensive purchase, like a new home or car, there are right and wrong ways of saving; your child’s college tuition is no different. According to the College Board, the average cost of tuition and fees for the 2013–2014 school year was $30,094 at private colleges, $8,893 for state residents at public colleges, and $22,203 for out-of-state residents attending public universities. That is no small price tag for four years, especially if you have multiple children attending college. This is why it is important to know the best tips and tricks for tackling college tuition, even if your child hasn’t started preschool yet.
Use your time wisely. One of the biggest mistakes when it comes to saving for college is waiting too long. Parents can find the whole process intimidating and instead of putting money aside early, they put off the whole ordeal entirely. However, when it comes to any type of saving, time can be your best ally. Saving $25 a week over 18 years will add up to $41,394 at a 6 percent interest rate. Saving that same $25 a week over eight years will give you $13,256. That extra 10 years of savings makes a huge difference.
Choose the right account. Most financial advisers agree that 529 plans are the best savings method for college when compared to other options such as savings bonds and Uniform Transfer to Minor Accounts (UTMA). 529 savings plan are appealing because the money you invest is tax-deferred, and if it’s used towards qualified education expenses, the money becomes tax-free. It is also a safer option because if your child decides not to go to college and you have a 529 plan, you can change the beneficiary of the plan to other family members or even yourself.
List yourself as the account’s owner. Who is listed as the savings account’s owner can be critical because financial aid formulas count a student’s savings more than a parent’s. 20% of a student’s savings is earmarked for college, while only 5.64% of a parent’s savings is set aside for tuition bills. Putting yourself as the owner instead of your child can help you out when it comes to financial aid.
Pay attention to fees. When picking an account, make sure to pay attention to fees. Especially if you are saving over a long period of time, these types of fees can add up to thousands of dollars. Try to find a plan with lower fees, usually a plan sold through your state.
Visit this Consumerist article for more tips and information.