Did you know that the average annual cost of private college tuition and fees is around $40,000? The cost of higher education can often seem daunting, with students ending up with large student loans, starting their careers in debt. (The average debt of graduates who take out loans is more than $28,000, according to US News & World Report.) But, with proper planning, you can help your child get off to a better start. And now is always the best time to start.
Choose the best way to save for your child's education.
You may have heard friends or family mention that they are saving for their child's education. There are a number of ways to save—here are some of the more common savings accounts that are used:
- 529 College Savings Plan
- Coverdell Educational Savings Plan
- Uniform Transfers to Minors Act (UTMA) custodial savings account
These accounts each have different features and benefits. Some of the differences include the amount that can be contributed to an account, how taxes may affect the growth of the account or of your income taxes, and the flexibility in changing the beneficiary. Some plans even allow for educational expenses for grade-school students.
Each family's situation is different.
Talk to your family about your child's future education—it may be that other family members are ready and eager to help contribute to their saving's plan. Also, an investment professional can help you navigate the planning process and answer questions specific to your family structure, including:
- If I have multiple children, do my savings have the flexibility to apply to any child?
- If I only have one child, what happens to the designated savings account if my child does not need it?
- Besides tuition, what else can the funds be used for?
Your child's future depends on you.
Depending on the age of your child, college may seem far away. But, the earlier you get started, the sooner you'll have a plan, and the greater chance of success you'll have in reaching your goal to help your child. Talk to a investment or tax professional about your family's needs, as they will understand and create the best possible financial plan for you.