College Savings 101: How to Pay for Your Kid’s Education
Have questions about how to save for your child's college education, how much to save, and where to look for good financial vehicles? Gain insight with this helpful guide.
Information provided by FinAid suggests that parents saving $50 a month from a child’s birth would yield about $20,000 by the time the child turns 17, assuming a 7 percent return on investment. Saving $200 a month would yield almost $80,000.
But how do you do that? And how do you know that you are picking the vehicles with the highest probability of making your money grow? “In many cases, parents who know they’re behind in planning for that big event may just continue to do nothing, hoping that their children will get scholarships or loans,” says Francine L. Huff, author of The 25-Day Financial Makeover: A Practical Guide for Women. “But it’s important to look at a child’s college education as an investment for their future,” she adds.
“Starting an educational savings account or buying bonds through monthly, automatic savings plans can be a relatively simple way to accumulate savings. The easiest way to do this is to set up automatic deductions from a checking account, even if you only start with $50 a month. That way the money will be saved on a regular schedule and more than likely won’t be missed.”
Margaret A. Munro, author of 529 & Other College Savings Plans for Dummies, advises parents to “save often, save early, save a lot. Start as early as you can. Don’t get discouraged and be consistent.”
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