Saving money for your kids to go to college is not an easy task. Data from the federal reserve suggests that around 39% of Americans don’t put money aside that can cover a $400 emergency. If you are part of this demographic, and you have kids who one day will want to go to college, you must make some major financial changes. Read on to find our five ways to save money so your kid can go to college.
Put Money Into Eligible Savings Bonds
Eligible savings bonds can be used to save money for a lot of purposes. One way you can use them is to keep the money so your child can go to college later on. The advantage of eligible savings bonds is that when you redeem them and use the money to pay for college, they will most likely be exempt from tax. You must note, however, that this might be subject to certain restrictions. The major advantage of using savings bonds for college financial aid planning is that they are guaranteed by the government.
Education Savings Account
Another good way to save money for your children’s college fees is to use an education savings account. This is a tax-deferred trust account that you can use to keep the money for higher education expenses. Apart from fees, the money can also be used for room and board. The money from these accounts must be used before your child turns 30. After 30, the money might be subject to some tax penalties.
Put Money Into a Custodial Account
A custodial account can be used for college financial aid planning. However, apart from just money, this account can also be used to hold stocks, mutual funds. There are no limits to the amount you can keep in a custodial account. Your kids will be able to use this money once they are of legal age.
Invest in Mutual Funds
There is a lot that you can invest in as a way to keep the money for your kids’ college expenses. However, your profits will likely be subject to annual income taxes.
Take Out a Life Insurance Policy
This is the final method on our list. Taking out a permanent life insurance policy is a great way to save money to college your children’s college expenses. This method also allows you to render some of the money tax-exempt.
Saving money is a great idea, especially for your kid’s education. Therefore you must think about college financial aid planning