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The earlier you begin saving for your child's college education, the better.
If your child is an infant or teenager, use the Saving For College Work Sheet
and the College Expenses Work Sheet to help you get started.
Develop A Plan
After estimating the expenses of your child’s education, begin accumulating needed
funds through savings and investments.
You should consider a number of factors when developing your plan.
- Investment returns. Will expected returns outpace or keep up with rising college costs?
- Investment contributions. Does the savings vehicle require or allow one-time, irregular
or monthly contributions? Is there a minimum or maximum contribution limit?
- Investment fees. What annual expenses are associated with an investment instrument?
Are they justified and how will they affect your returns?
- Convenience. Is it easy to establish and maintain your accounts?
- Risk and time horizon. The younger your child, the greater the investment risk
(and potential reward) your plan can accommodate.
- Liquidity. Make sure you have access to funds when you need them.
For young children, the best investment goal is likely long-term
growth. For older children, consider safer income-producing investments
where access to funds is less likely to negatively impact investment results.
- Will earnings be subject to federal or state income taxes? If so, will
earnings be taxed in your child’s tax bracket or yours?
- Financial aid implications. Some investments can diminish your
child’s ability to qualify for financial aid.
- Ownership. Is it better for accumulated college savings to be
in your name or your child’s? Do you want your child to have control
of the funds now, in the future or at all?
Ways You Can Save
- Establish a monthly allotment from your paycheck or
checking account to a college savings account.
- Once your children go to elementary school, divert
the money you spent on daycare to your college savings.
- When you pay a loan in full, redirect that money to your college savings.
Protect Your Savings
A major illness, disability or death in the family can interrupt the most
effective college savings plan. If the worst should happen, insurance helps
guarantee your children will have money for attending and completing college.
A reputable insurance company can determine the right types and amounts of
insurance for you. Choose a company known for service, quality and financial strength.
Do You Need Professional Help?
Bookstores, libraries, college planning Web sites and college financial
aid offices offer abundant college savings advice.
In addition to sorting through it all, a financial planning professional,
attorney or tax accountant with specific college planning experience can help
with urgent needs, such as beginning a plan when your child is older or managing
the tax liabilities of financial gifts. Such a professional can be a valuable and
cost-effective partner.
| With: |
You Can: |
| Life Insurance |
Provide money your child will need
for higher education if something happens to you or your spouse before
reaching your college savings goal. |
| Disability Insurance |
Safeguard your income if you become
ill or disabled. This will enable you to keep saving, and you will
not have to use college funds for unexpected medical expenses. |
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Basic Money Management
Basic Money Management