It’s never too early to start saving for college, so do some research and determine which options are best for you. For example, a 529 savings plan allows your investment to grow tax-deferred, and distributions to your child’s college costs come out federal tax-free. A Coverdell ESA is another good choice because it lets you deposit up to $2,000 per year for your child to use tax-free for expenses like books or room and board.
Also consider the following advice from John McDonough, CEO of Studemont Group College Funding Solutions: “Preparing to have a child and preparing to put that child through school is exciting but also daunting,” he says. “They can both keep you up at night, and they both cost thousands of dollars. To help alleviate the stress that goes along with milestones in life, we prepare for them. You don’t wait until the day before having a child to buy diapers, clothes, etc. You also shouldn’t wait until a year before college to start saving for one of the biggest expenditures of your life.”
McDonough says the cost of attendance for schools can range from $15,000 per year at more affordable state schools to $65,000+ at elite private schools. And college costs are rising with no end in sight. “Starting to save for your child’s education and preparing for these costs can be the best decision you make for your future,” he assures.
Tip: Don’t have any extra pennies to save? Dedicate birthday and holiday money from relatives to your child’s college fund.