Emily Clarke

Guide to Starting a College Fund for Your Child

With the rising costs of higher education, it's wise to speak with a college financial planning advisor to set up a college fund for your child. Whether they're a newborn or already in grade school, it's never too late to start saving. You've likely heard many horror stories about student loans and all the nightmares that come with them.

A college fund is a great way to set your child up for success while eliminating the potential burden of paying for an education. While there are many other ways to get financial assistance for college, having a dedicated fund makes things exponentially easier for you and your child when bridging the gap.

Types of College Funds Available

There are countless types of savings accounts you can open. Speaking with a college financial planning advisor is important. They can guide you in the right direction, review your options and help you find what's right for your family.

High-Yield Savings Accounts

One option is to open a traditional high-yield savings account. While these accounts aren't specifically designed for college saving, they're worth considering. In 2023, many institutions offer rates of 5.0 percent or more.

Get into the habit of putting some money aside with each paycheck, and your kid's college savings can grow considerably over the next decade or so. These savings accounts are highly flexible. Therefore, you can use the funds to pay for tuition, room and board, textbooks, etc. Plus, there's no need to worry about naming a beneficiary or having strict limitations.

529 Plans

529 plans are tax-advantaged alternatives to traditional savings accounts. There are a few different types, but some of the most popular include 529 savings programs and 529 prepaid plans.

529 savings programs sometimes go under the name of "College Savings Plan (CAP)" or "College Investment Plan (CIP)." Either way, they work the same.

With this program, you name your child as a beneficiary. Then, you can make after-tax contributions that the program invests. When college time rolls around, your child can use the funds to pay for qualified expenses like tuition, fees, etc.

Author Resource:-

Emily Clarke writes about RIA and wealth management for financial advisors and more. You can find her thoughts at financial planning blog.