With the costs of college on the rise these days, it’s more important than ever to build a college fund for your children years before they step on a college campus. If you’re a single parent, start preparing now by saving money for your child’s college fund. Listed here are some tips and resources, but the best resource of them all is your attorney. Be sure to talk with your attorney when you’re trying to decide on an investment for your child’s college fund.
Start Saving Money Early
If you haven’t started to save money for your child’s college fund, start now, no matter how old your child is. Naturally, the younger your child is, the better, but it’s never too late to start.
Try to save money in as many areas as possible. For example, child care is a large expense that many parents, especially single parents, pay that could have gone to a college fund. If you have family in the area, try asking them to watch your kids from time to time. Or you could join a babysitting cooperative or check out charitable options, such as church child care.
Another way to save money is to earn more money. Getting a side job or dabbling into freelance work could be a good way to squirrel away more money in your child’s college fund.
Research Your Options
Saving money for your child’s college fund is only the first step. The next thing to do is to figure out where you want to put the money until it’s time for your kid to go to college. There are many options out there; here is just a small list. Talking with your attorney will help you decide on the best option for you and your child.
Prepaid Tuition Plans
These plans allow you to start paying for your child’s college education at current tuition prices for colleges in your state. A prepaid tuition plan helps you save a lot of money, since tuition prices are rising steadily every year. With a prepaid tuition plan, you can either pay for a four-year education or at least a part of your child’s college education.
If you opt for a prepaid tuition plan, your child will be able to go to a state college with at least part of his/her tuition already paid off. Even if your child decides to go to a private college or a college in another state, you can still transfer the prepaid tuition plan or withdraw it for a fee.
529 College Savings Plans
If you’re comfortable with investing, consider getting a 529 college savings plan for your child’s college fund. It’s tax-free, as long as you use the money for higher education. These plans don’t require a lot of money to start (as little as $25!) and you’ll be able to use the money at any accredited college or university.
Coverdell Education Savings Accounts
You can save up to $2,000 a year in a Coverdell ESA with post-tax dollars and the account will grow thanks to interest, which won’t be taxed when you withdraw it for your child’s education.
Custodial Accounts
This is basically a savings account in your child’s name, but you have complete control over the money in the account until your child turns 18 or 21, depending on where you live. The first $850 that is saved per year is tax-free, but the next $850 is taxed at your child’s rate. Beyond that, it’s taxed at your rate. Your withdraws will be taxed as well.
Consider Financial Aid
Some single parents might be concerned that if they start saving for their child’s college education, their child might not qualify for financial aid later in life. However, this is not always true. It depends on how you save for your child’s college education. For example, 529 college savings plans and prepaid tuition plans have little or no impact on your child’s future eligibility for financial aid, thanks to laws that have been passed recently.
Talk to Your Attorney
It can feel overwhelming when researching the different ways to save for your child's college fund. Is a prepaid tuition plan the best choice for you or should you invest in a 529 college savings plan? And the tax details on all these plans can get very complex and confuse you. The best financial decision for any situation always depends on many factors that are unique to the individual. The right choice for one single parent might not be the right choice for you. Thus, it’s essential to have a talk with your attorney to discuss your specific situation to find the right way to save money for your child’s college fund.
Ensure the best future for your child by talking with an attorney who is knowledgeable about the options available to you. You’ll get personalized and helpful advice when you seek out the advice of one of the experts at Kenny Leigh & Associates.
