How to Set up a College Education Fund
Almost everyone wants to save for college. College is expensive, and parents want to save money for college in order to give their kids help paying for college. In order to save money for college, you need to understand the types of college savings programs and he best method of creating a college education fund.
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Instructions
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Open a 529 Savings Account. These accounts allow you to build a college education fund tax free. It is much easier to save money for college if you can do so with pre-tax dollars. Most 529 funds have state specific rules, but you can open a 529 in any state that you want, even if you don't live in that state. Research a few different states before deciding where you will open your 529 to keep your savings for college.
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Designate a beneficiary. You can open a 529 savings account to build a college education fund for each child you have. This allows you to grow your savings for college at a higher rate, since you can put more money away before taxes in your college education fund. So, if you have multiple children, you can open a 529 account as a college education fund in each of their names and designate each child as the beneficiary of that college education fund.
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Purchase investments for your college education fund. Most college education funds are just like other types of investments, except they are specifically designed for parents who want to help by paying for college for their kids. This means you can buy stocks or mutual funds. Invest in relatively safe funds and stocks so the money will grow without risk.
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Consider tuition credits. In addition to investing your college savings in stocks or mutual funds, you can also use your college education fund to pre-pay for tuition in some state universities. This means you can pay tuition today for your child who will not be attending school for many years. This allows your college eduction fund to go much farther, and helps stretch your savings for college. If the child who you are providing the help paying or college to decides not to attend that public universities, in most cases the tuition credits are transferable to a different fund.
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Tips & Warnings
The sooner you open your college education fund, the more your savings for college will grow and the more you will be able to help paying for college for your kids.
