As a new parent, it’s hard to imagine your child as anything other than that – a child. You’re busy being caught up in all their firsts, relishing in all those special moments of childhood, all while time is marching on and they are getting older each year. I mean, how many times have you heard parents exclaim “they grow up so fast”? Before you know it, they are in high school, preparing for college or university, and their whole future is before them. This is when many parents get that sinking feeling in their gut that they wish they had planned ahead, and found a way to have the money necessary for schooling.
So, even though your child is young right now, and university and college are the furthest thing from your mind, this is actually the best time to start planning for their educational future. Here we’ll take a look at some basic steps that you can use that will help in the planning process.
Create a Household Budget
One of the best places to start is by creating a budget for the household that clearly outlines all the expenses and income. This is the very best way to determine how much you can afford to save, and where cuts can be made in the budget in order to increase the savings.
Now, keep in mind that a budget isn’t meant to be stagnant for many years to come, rather it’s something that you’ll want to re-visit from time to time. If you change jobs, get a raise, move, get a car, take on more expenses, etc. it will all require you to take a look at the budget again and likely re-do it.
If you’re new to creating a budget, be sure to check out the many free apps that can make budgeting a breeze. They do all the calculations for you, can you can track monthly expenses through them, and when you do need to make changes, it’s quick and easy.
Open a Savings Account in Their Name
If you aren’t interested in a designated educational savings plan, then there is nothing that should stop you from opening a standard savings account in their name. Now, because a child can't sign legal documents, usually the account will be in your name first and they can then take it over when they are legally allowed to.
The savings account gives you the opportunity to make regular deposits that you can set up through your bank, or deposits when you have the extra money to do so. Remember, even small amounts count and will add up over time. You can also ask for grandparents, godparents, aunts and uncles to give money to their savings account as gifts rather than toys and clothing.
Look Into the 529 Plan
The 529 plan provides parents with a way to save for their child's education by making contributions with after-tax dollars. The balance then grows in a tax-free manner, which can help the account to grow that much faster. When you make withdrawals for qualified education expenses, there is no tax that is charged.
It should also be noted that there are two different types of 529 plans, which are the prepaid tuition plans and the college savings plan. You'll want to read up on both to see which one makes the most sense for you and your family.
Consider Investments as a Way to Increase Your Wealth
Another route to go is by growing your wealth so that by the time they are ready to head off to college or university, you are in a much better financial position, which will allow you to pay for all or a portion of the schooling. For those who have never gone the route of investments, it can be wise to work with a broker who can make decisions on the best places to invest your funds.
InvestinGoal is a popular website that is ideal for those who are looking to get into investments and need a little help/direction. Its site is filled with guides and reviews on some of the top and most well-known brokers out there such as Pepperstone. Founded back in 2010, it has built a reputation as a very trustworthy and popular broker. The big allure here is that you won't have to pay high commissions on trading, which means more money in your account at the end of the day.
Getting Your Ducks in a Row Nice and Early
So, before you get too caught up in life and your child’s everyday adventures, it’s a good idea to give the future some thought. Planning from an early age will only help to ensure that when the time comes, college or university will be that much more affordable.
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