How To Incorporate College Savings Into Your Financial Plan
Kids cost money. It may seem like they would get less expensive as they get older, but this could not be further from the truth. During high school, there are formal dances and travel for sports to think about. Once college hits, however, the costs will only go up even more. Even relatively cheap state schools will cost thousands per year. That's why it's important to make college savings a part of a successful financial plan. Here are some options that might provide a good strategy for college savings.
Make More Money
Earning additional income is one way to put more money toward a college fund. This might mean delivering pizzas a couple of nights a week. It might also involve starting a side hustle that brings in a few hundred dollars per month. Part of that money could go toward a child's college expenses. The upside of this method is the fact that the money doesn't have to go toward education if a child decides not to go.
Open a 529 Plan
One benefit that comes from opening a 529 plan is the ability to deduct contributions from taxable income. States offer these plans as a way to invest for future educational expenses, and it's possible for savers to choose which state's plan they want to utilize. It's important to use these funds for education, or there are tax implications.
Use a Roth IRA
Most people think of retirement when they think of Roth IRAs. However, it's possible to use some of these funds for educational expenses. Although there are restrictions on when account holders can access the growth in their accounts without penalty, those with a Roth IRA can access their contributions at any time. While it's not ideal to take money from an account that's primarily intended for retirement, this is an option that's available.
Regardless of which option parents decide to use to fund college for their children, it's a good idea to get started early. This provides more time for the money to compound, and regular contributions over time can go a long way toward offsetting college expenses.
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