If you want your children to go to college without taking out a student loan, you may need a saving plan for college. According to U.S. News, the cost of sending a child to college in the 2020-2021 school year was $11,171. This is per year at a public university in your state. By the time you pay for books and other odds and ends, you can expect to pay more than $50,000 for your child’s education.
With such a high cost, a college education for your child is possible if you make the best financial choices now. You need to learn more about various savings plan options to make an informed decision and set your kid up for success. Here’s your guide to saving for your kid’s college:
Why Should You Save Money to Send Your Kids to College?
With the costs so high, why do you need to save for your child’s college? With a four-year degree, your child will earn around $750,000 more than someone without one throughout their life.
While you expect your child to receive some financial aid, this money rarely covers the money it takes to graduate. By saving, you can help offset your child’s education expenses.
Saving Money for Your Kids’ College
Before you can start saving money for your kids’ college tuition, you need to select a savings plan to get started. There’s a diverse selection of choices. Here’s a look at a few of the popular options for you to consider:
A savings account is a traditional and safe way to save for your child’s education. You may think that you won’t earn much interest, so why bother? Actually, if your child is young, you can save some serious money over the next decade or more while they grow up. Also, you don’t have to use the money for education if your child decides not to go to college.
College Savings 529 Plans
A 520 plan is a solid way to invest money and build an education nest egg for your kids. While you’re saving money for your child in this fund, you won’t pay taxes on any money the account earns as long as you use the funds for educational expenses. The funds can be applied to any or all of your children’s education costs. In some cases, you can use the funds for educational expenses before college.
UNest Tax-advantaged Investment Account
The UNest tax-advantaged investment account is a relatively new way to save for your child’s college. You sign up and invest via a mobile app — available on both Android and Apple phones — or online. The app creates a UMTA account for you to save for your child’s future.
You can arrange for automated payments into the account each month of as little as $25 and change the amount as often as you like. Once you have funds in the account, you choose how you want to invest based on your child’s age. The app even makes recommendations for investments also based on your child’s age.
Family and friends can also place funds into the account. The app offers cash back into the investment account when you shop online at specific stores. You can quickly change your investment preferences through the app. You aren’t stuck paying outrageous brokerage fees. The app offers a plan for a single child and another for a family with up to five children. Both plans require a small monthly fee.
When your child begins taking money out, it’s taxed at the kiddie tax rate. If your child takes out and earns less than $2,200 a year, there aren’t any taxes due. One of the best features is that UNest doesn’t limit how you spend the money. Not all kids want to go to college. With UNest, You can use the funds in any way that benefits your child. This money might be a down payment for their first car or home, or maybe, they’ll want to use the funds to open a business. It’s up to your child how to spend it.
How to Get Started With UNest Investment Account
It only takes a few minutes to get started with an UNest investment account. You start by visiting their website or downloading the app from your phone’s app store. You’ll need to provide some essential personal information, including:
- Your full name and your child’s
- Date of birth for both parent and child
- Your Social Security number or ITIN and that of your child
- The home address of both the parent and child within the United States
- Information about the U.S. citizenship or legal residency for the parent and child
Depending on your circumstances, you might need to upload proof of identities, such as a driver’s license, birth certificate, or proof of residency. The app walks you through the steps, making it easy. Once you get through this information, you’ll need to provide information to set up the automated investment through your bank account.
As a parent, you want only the best for your kids, including saving for their future. Making an informed decision is essential to choosing the best savings option for your family. Whether it’s a UNest account or a 529 plan, start saving now.
What People Ask About Saving Money for College
This is a tricky question to answer. Your financial situation is unique to you. The goal is to save as much as you can without placing yourself and your family into financial jeopardy.
First, you probably won’t pay the total amount for your child to go to college listed on the university’s website. Your child will probably get some sort of financial aid. You can use the college cost calculator on the university’s website to get a realistic expectation on how much you need to have saved.
If you use the funds in a 529 plan for anything other than education expenses, expect to pay federal and state taxes on the money. Also, you’ll pay a 10% penalty.
Yes, if you can offset the cost of college for your child, you set them on the path to earning more money without the need to take out as many student loans.