Raising children is expensive, and costs only increase as they reach their teen years. Funding your children’s education is a worthwhile endeavor, but paying for tuition, books, and living expenses can quickly become impossible if you have not prepared financially. It is best to plan early and start a college fund for your children while they are still young. Here are a few creative ways to begin college savings plans for your kids.
1. Open a 529 College Savings Plan
Opening a 529 College Savings is a wise decision if you are serious about planning for your children’s future. This account is specifically designed for higher education and comes with low fees and other unique benefits. Any withdrawals used to pay for qualified expenses are exempt from federal income taxes, a significant advantage if you plan to save a considerable amount of money. Have your friends and family contribute to your child's 529 Plan on birthdays and holidays to help the funds grow quicker.
2. Open a Coverdell Education Savings Account (ESA)
Coverdell Education Savings Accounts are similar to 529 accounts in that it is an account meant to be spent on education expenses. Like 529s, investment earnings within the account can grow tax-free, and withdrawals can be taken tax-free as long as they are spent on education expenses. People often confuse 529s and Coverdell Education Savings Accounts as they are similar. Although knowing the differences and nuances between the two accounts is essential, as one may be more beneficial than another, depending on your situation. To highlight a few differences: Coverdell Education Savings Accounts have a contribution limit of $2,000 / year that must end when the child reaches age 18. There's also an income limitation for the contributor. Coverdell ESAs typically are more flexible in the types of education expenses that qualify, including K-12 costs and private school, but they often have higher fees than 529s.
3. Start a Side Hustle
If your current income does not accommodate a college fund for your children, consider starting a side hustle to make some extra cash. With the proliferation of technology, side hustles are more common than ever before. You could sell homemade soap or crafts or offer services such as home cleaning or dog walking. You can also deliver groceries for Instacart, drive for Uber, or provide freelance writing services on a platform such as UpWork.
4. Open a Savings Account Designed for Kids
Encourage your children to help you save for their education as they get older. Opening a savings account for your children and encouraging them to contribute extra money from their allowance or babysitting jobs can teach them responsibility and good financial habits. Parents typically co-own these types of accounts, ensuring there are no difficulties when it comes to depositing or withdrawing funds.
5. Sell Unneeded Items
Children grow fast, and they often grow out of clothes and toys before they get much use. As your children outgrow items, make some extra money by selling unused or gently used items. Host a garage sale or let your friends and family know you are selling things you no longer need. Several online platforms allow you to create listings for free to reach a broader customer base.
Work With a College Savings Expert
Are you ready to take your child’s college fund to the next level? Summit Wealth Group provides customized financial advice to help our clients reach their goals. Our clients have access to financial tools, including a college savings calculator and investment strategies. Contact us today to set up an appointment with a financial advisor.