In 2002, a public university cost an average of $9,338 per year. It is thought that the average cost per year will be $19,413 by 2017. And that's just for tuition and fees for getting credit. Don't forget about room and board, books, food, clothes, and things to do outside of school.
Considering these numbers, it would be smart to start planning for your child's education right away.
You know about loans and scholarships, but those aren't the only ways to pay for college. You don't have to go into debt! There are many things you can do to plan for the future of your child.
529 Plans
A 529 plan, also called a "qualified tuition programme," is a way for families to save money for their children's college educations that doesn't cost them any taxes.
Each state has its own 529 plan, and you don't have to live in a state to invest in its plan.
The two kinds of plans are:
Prepaid Tuition Plans: With these plans, you can pay today's prices for your child's in-state tuition. There isn't much risk with these accounts, and they are guaranteed to keep up with or beat inflation in the state. But these plans are usually only for people who live in the state, and if your child wants to go to a private college in the same state, the cost may not be covered.
Education Savings Accounts, or "college savings plans," are investment accounts whose value changes with the market. They can be used at public and private colleges that accept them, and there are no residency requirements. Also, some plans have high limits on how much you can put in for each beneficiary, and you can put in up to $11,000 a year without having to pay a gift tax.
Accounts for savings
Even if your child won't go to college for a few years, it's never too late to start saving. Find out where you can save money and put that money into a savings account with a high interest rate.
For example, instead of buying 2 video games as a birthday gift, you could buy just one and put the rest of the money into a savings account. What about Hanukkah and Christmas? Sure, it's fun to open gifts, but I can guarantee that the novelty of those gifts will soon wear off. In the future, your child will thank you for making sure that they had a stress-free way to pay for college.
Here's a tip: look for an online bank that is FDIC-insured and is based in the U.S. Because these banks don't have branches, they can offer higher interest rates because they don't have to pay for the costs of running them. They work just like a regular bank, except there isn't a branch. You put money into your checking account and get statements either by email or in the mail every month.
