by Bo, May 13, 2013
Something that almost every parent dreads is the nearly overwhelming task of saving money for their child’s education. There are a lot of different options to consider, and many of them can be passed directly to their child once they are old enough to start saving for themselves.
A Savings and Checking Account
When planning on how we are going to be saving money for college, the first thing most of us automatically consider for personal savings is either a checking or savings account. Both of these options have many benefits that make them simple and attractive options. Most notably is the simple convenience, since most of us can go into any financial institution and open an account. The money is easily accessible and there shouldn’t be any hidden fees that could cause problems when it’s time to go to school.
Also, once your child is old enough, it is really easy to switch the account into their name so they can start adding to it on their own. If you start them with a basic checking account, it will be easier to limit their spending, and they won’t have to deal with out-of-control interest payments on credit cards. They can also order the checks they need to pay for their apartments, books, and tuition whenever they need to. Either of these accounts can be started anytime, with your child at any age, and it is a comparatively safe option since you can open an account that consistently builds interest unrelated to the fluctuations of the stock market.
Saving money for college with this option is easier than most people think and involves very little aside from opening the account. A trained and certified professional will take care of your account, based on the degree of aggressiveness that you provided. In other words, if you want to play it safe and build interest slowly, they will have a options for you. On the other hand, if you want to play it a little riskier, you can have them invest in a portfolio that has higher returns, but more chances that it could decline significantly.
Investing in stocks, trading, and watching the trends are jobs that fall to this trained professional. You will be in charge of just watching the money grow. While this is not age-dependent on a child, it is best to start saving earlier rather than later. The money is not as easy to withdraw and there are fees associated with this account, but as far as rate of return on your investment is concerned, it is one of the more profitable options.
529 Savings Plan
While you may or may not have heard of this before, it is a very good option for almost. Unfortunately, these types of accounts are a new concept to most people, despite their value. They are offered with tax breaks and are specifically designed to be used as college savings plans. Some withdrawals are now allowed with no federal tax which means you will pay less in fees. Unlike other government savings plans, this option has no income or age limitations, giving more freedom to save money in the way you want. Again, the younger your child is when the account is opened, the more money will accumulate.