5 Tools to Help Make Saving for College Easier
Saving for college is a huge undertaking, and it can dramatically benefit your child’s life and prevent them from facing several years trapped in debt repayment. Fidelity Investment’s 10th Annual College Savings Indicator Study reports that on average, parents plan to pay for 70 percent of their child’s college tuition bill. However, the report finds that they’re only on track to meet 29 percent of that goal by the time their child starts freshman year.
Saving for college takes some financial sacrifices, and these five tools can help your savings go even further.
1. Tax-Advantage Savings Accounts
Growing college savings in a tax-free account is the smart way to go, and the two best options are a 529 plan and a Coverdell Education Savings Account. There are pros and cons to both accounts. The 529 plan only allows money to be used tax-free for college costs, and the Coverdell ESA caps contributions at $2,000 a year. Research both options to decide which college savings account is best for you—and yes, you can use both.
RaiseMe offers students micro-scholarships as early as their ninth-grade year. Students can earn scholarships from different colleges based on their achievements, such as earning $120 for getting an A in algebra or $1,500 for playing a sport and holding a leadership position. Students will be awarded the scholarship money once they are accepted to that school. Not only does RaiseMe help families with saving for college, but it also motivates high school students to do their best and be more involved.
3. Automatic Savings Apps
If your goal is to set aside money each month, but you can’t seem to find an extra $50 to spare, then the Acorns and Digit apps can help. The idea behind both of these apps is to set aside money from your bank account without you even noticing it is missing. Both apps charge a small monthly fee to use them, but Acorns invests your money and Digit rewards users with a 1 percent savings bonus. While you won’t be able to pay for a semester on found change, these apps can help you save enough money for other school needs, like books, lab fees, or parking passes.
4. College Savings Calculators
There are several online college costs calculators, like this one from CollegeBoard, that will help you calculate the cost of attendance and whether you are on track for saving enough money. For students interested in Azusa Pacific University, this Net Price Calculator helps families discover just how affordable a high-quality degree can be with financial aid and scholarships.
5. Custodial Accounts
Another savings option for college is custodial savings accounts, which include the UGMA (Uniform Gift to Minors Act) and UTMA (Uniform Transfer to Minors Act). These two accounts are unlike the 529 plan or the Coverdell ESA because they do not offer tax advantages and are considered the child’s assets and counted against financial aid. The upside to using these savings accounts is that they don’t have to be used for educational expenses, which can be beneficial for students who get full-ride scholarships or wish to use the money for a home instead.
College is not cheap, and the average price to get a degree creeps up every year. These tools can help you get ahead on saving for your child’s tuition. Remember, the earlier you start saving, the better.
Posted: January 30, 2018