Tips to Save Money for Your Child's College Education

Tips to Save Money for Your Child's College Education

Tips to Save Money for Your ChildWhen your child grows up and attends college, let not the high tuition fee act as an impediment to his or her education. With the rising cost of education, it is imperative that you adopt a prudent investment policy at present, so that your child’s college education can be easily financed by you.

Although, grants and scholarships are available to finance your child’s education, but if your child could not avail any of these funding opportunities, a prudent investment policy ensures that he will not be deprived of a fine college education. You can choose an investment option commensurate with your income and family budget.

College trust fund
If your annual income is high, you can establish a trust fund that will finance your child’s education in future. Many banks and investment companies work with parents in establishing a college education fund. A well-monitored prudent investment policy will help the fund to increase in size and earn interest. Investment professionals handle these funds and make sensible stock investments to increase the flow of money into the trust fund, so that when the fund matures, your child has enough money to finance his education.

Saving accounts
If you don’t have enough money to set up a college trust fund, you can set aside a small amount of money every month to be deposited in a savings account. Certificate of deposit or fixed deposit is another option that would help you to earn interest.

Besides financing your child’s future higher education, if you start saving for your child’s education, you can get tax relief under the Taxpayer Relief Act. The Education IRA allows a parent, grandparent or any other designated individual to invest up to $500 per year for the child’s education. Contributions to Education IRA are not taxed. However, if you fail to distribute the money for financing your child’s education within 30 days of his or her 30th birthday, all the amount in the account will be taxed as ordinary income along with 10 percent tax penalty.

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