Higher education offers young adults many advantages and avenues for reaching their personal and professional goals. For instance, a college degree may lead to increased job prospects, greater earning potential, and networking opportunities. However, it also costs a substantial amount of money.
Parents who want to make sure their children are financially prepared to attend college can do so with the proper savings technique. Part of this strategy involves starting to save at the right time. Community West Credit Union discusses when to begin saving for college and offers ways to maximize your child’s college fund.
The Earlier the Better
With tuition prices seeming to rise each year, most financial professionals say saving for college as early as possible is a wise decision. According to a recent study conducted by Fidelity, 42% of American families stated they wished they had begun saving for their child’s education sooner. The reason is the earlier you start saving, the more time your money has to grow.
Different Ways To Save
When saving for college, parents and guardians have a variety of options, each with distinct advantages. Some of the most beneficial ways to save for your child’s education include:
529 Plans
A common way to save for higher education is by opening a 529 college savings account. 529 Plans are a savings option grows and compounds tax-free over time. This method allows people to use the money in the account without needing to pay taxes, provided it goes toward qualifying educational expenses like tuition. Other uses for a 529 Plan include purchasing books, room and board, school supplies, computers, and similar items.
529 Plans come with some drawbacks, as well. For example, the accounts feature additional charges, including enrollment fees, annual maintenance, and administration fees. Also, you may incur a penalty should your child not complete their degree or use the money for ineligible expenses.
Savings Accounts
Because they are usable for anything, regular savings accounts make for an excellent college fund. The advantage of setting up a children’s bank account for college is that there are no limitations on the amount of money you can deposit into the account, nor are there fees for withdrawing cash. The setback to this option is interest rates on saving accounts are lower than inflation. This means your money will not compound over the years, prohibiting you from maximizing it.
Grants and Scholarships
While not a money-compounding option, it is important to note that grants and scholarships are an excellent way for students and their families to ease the cost of college. With more than five million scholarships that make up for over $24 billion available to students, grants and scholarships reduce the money families need to save. With scholarships in nearly every extracurricular activity and hobby, students may search various databases to find aid opportunities that apply to them.
Begin Saving For College Today
While starting early with your child’s college fund is ideal, it is never too late to begin. Even if your child will be attending college in a few years, there’s still value in saving now. Even though the money will not have the same time to grow, the dollars you accumulate now mean you will have less to spend in the future.
To help Michigan residents in Comstock Park, Grandville, Hudsonville, Kentwood, Middleville, and Rockford, get started saving for college, Community West Credit Union offers expertise and a wide range of saving solutions. Contact us today to learn more about ways you can begin saving.
