Education can be a life-changing experience for your child – in addition to gaining the knowledge and skills they need to succeed in the workplace, they can also have the opportunity to gain independence, make life-long friends, and explore new interests.
However, many students often have to limit their choices (or forgo the college experience altogether) simply because of the cost of tuition. Here are four ways that you can help save for your child’s education to give them the best chance of getting high quality education.
Creating a budget plan is the first step when it comes to saving for your child’s future education costs. Start by comparing your income against your monthly expenses to see how much you can devote to college savings. The next step is to create a savings target:
While you can start saving at any age, the earlier you start the less you’ll need to save in the long-run.
Savings bonds are low-risk investments offered by the U.S. Treasury Department that can be used to help pay for education costs if purchased early in the student’s life. One benefit of purchasing U.S savings bonds is that they are fully guaranteed by the U.S Treasury and offer modest interest rates. Additionally, the interest earned is generally free of federal, state, and local taxes as long as the funds are used to pay for qualified college expenses.
529 plans (also known as state college savings funds) are tax-advantage savings plans designed to help you save for future education costs. They are usually sponsored by states, universities, or state agencies and offer various financial incentives, including:
Lastly, if you own your home, you can consider funding your child’s tuition costs by taking out a home equity line of credit (also known as HELOC).
A home equity line of credit is a type of home equity loan that allows you to draw funds as you need them. Since HELOCs use your home as collateral, they typically have much lower interest rates than personal loans, credit cards, or other types of unsecured debt. The flexibility of a HELOC, as compared with the lump-sum borrowing from a home equity loan, can allow you to adjust your borrowing needs as your child’s education expenses fluctuate.