Should Parents Save Money for Their Child's College Education?

My personal answer to this, and remember this is my own decision is yes. My wife and I are wanting to have our first child and this is one of the first things we discussed before we even started trying to get pregnant. We both have college educations, we both have full-time steady income jobs, my Grandmother set aside money for myself and my brother to go to college, and my wife paid hers through scholarships, grants, and working through school. My father has always said that he wanted to provide a better life for his family than he received, and always said to me that I would understand later in life. I do understand and that is what I want to do for my future children as well. I do not want my children to graduate with a lot of college graduate debt like I did.

I hear a lot of people ask, if I'm going to save for my children's education how much? Think of it this way, it's not the same for every student. Do you want your kids to graduate college and have money left over to go to graduate school if they would like, or do you want them to try and obtain scholarships, grants, and jobs to help pay off school? These are all things that the parents need to answer for themselves. If you are struggling to make ends meet how do you also save for your children's college funds? I would suggest trying The program will allow you to create a budget and see what expenses you can cut, or where you can save a little extra money. Remember, a little*money for savings is better than no money at all.

You need to think of it this way, if you save $50 a month from the very first day your child was born, by the time they turn 17, you would have about $20,000 assuming a 7% return on investment. If you saved $200 a month instead, with a 7% return on investment by the time your child turns 17 you would save nearly $80,000! If you would like to check out more savings calculators check out this resource at

But you may ask why would you do it, or are there tax benefits? The answer is yes. There are tax advantages to saving in a section 529 college savings plan.

What is a Section 529 Plan?

There are two types of section 529 plans, one is a prepaid tuition plan, and the other is a college savings plan. Prepaid tuition plans let you lock in future tuition rates at in-state public colleges at current prices which are usually guaranteed by the state. College savings plans are more flexible, but do not offer a guarantee.

Benefits of Prepaid Tuition Plans

-Guaranteed to increase in value at the same rate as college tuition. If you prepay for a year's worth of college education when your child is 5, when they are 17 it will have increased in value to still cover a year's worth of college education.

-Parents, grandparents, family, friends, can contribute to a prepaid 529 plan. This is great because you can take gifts and apply it to the plan.

-Prepaid Tuition plans are exempt from federal income tax, and very often are exempt from state and local income taxes.

-The Money in the plan is controlled by the account owner and not the child. Most parents love this feature, because they don't have to worry if the child will start withdrawing money and using it for non college expenses.

-Safe. affordable, and convenient option for a family that is not a finance expert or do not have access to a financial expert.

Benefits of a*529 College Savings Plan

- The money in the plan is controlled by the account owner as well and not the child.

-Have the ability to gain higher potential earnings on investments depending on the rate of return and the decision on how the portfolio risk is decided. You can be highly aggressive with 100% equity funds to a more conservative approach which would be more towards money market funds.

-No restriction on choice of college other than it must be an accredited college or university.

-Flexible investment options such as age-based meaning if you start saving later, you can make up for the lost time, and also risk-based allocation dependent on how aggressive or conservative you would like.

What investment Strategy Should you Use?

-The first suggestion that I would say is the most beneficial is start early. It is never too early to start and it's not too late to start. The earlier you start the higher amount of interest you will accrue over the life of your child and the more compounding interest you can gain from starting early. This means that you will have to invest less out of your own pocket if you start earlier to gain the same amount of money you would if you started later in life.

-The second strategy I would use is invest in a highly aggressive manner earlier in your child's life and progressively get to a more conservative portfolio. This would be the same strategy used when you are thinking about retirement. Would you really want to take the chance that a year before your child goes to college they lose 25-50% of their college fund? I would strongly suggest speaking with a financial adviser or someone who specializes in college savings to help accommodate the best investment rtrategy when it comes to your child's life.

-Get a Financial Adviser! I cannot emphasize this enough when it comes to your own investments as well as your college investments. If you don't know how investing works or the best strategies to take, talk to someone who does it for a living. They have more time, more resources, and more ideas of the best investments you can make in life. One strong suggestion I would make is, is that you research who your adviser is and don't get stuck in a point where they are doing bad business decisions for you. Ask around and see who has great reviews, great customers, and who has been in the business for years. It's your money, don't let someone else destroy it by not doing your own research.

-Use savings plans that actually have tax advantages for you. That means use a Section 529 plan, or look at something where you can have a tax advantage for saving money for college expenses. If you don't do this, you will be losing money at the end of the year when you file taxes and have to claim your interest. Again, do you research on your own to make a quality, information-based decision.

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