How to Best Raise Money for Your Kid's College
College is expensive now, and by the time your children reach college age, the costs are likely to be even greater. Because of this, it's smart to start raising money for your kid's college when she's quite young. The best way to do this is through a 529 savings plan--this is a managed fund that will grow your investments. She can use the money for qualified educational expenses tax free in the future. Best of all, the money saved in a 529 plan does not count against a student who fills out the Free Application for Federal Student Aid; she's still eligible for government grants.
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Instructions
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Research 529 plans for your state. There is no universal 529 plan. The funds and requirements--such as a minimum required to open the account--vary by state. Once you know what's available in your state, you can compare potential investments. These plans carry different management fees, which should be a major consideration when choosing one.
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Open a brokerage account. This will allow you to invest in a 529 plan. Before you open the account, make sure that the brokerage offers the 529 plan--not all do. You'll have to deposit the minimum amount, which could be as little as $15 but may need to be $1,000 or more.
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Choose your investment plan. Within your 529, you are usually able to choose a specific investment plan. This is similar to a retirement account--you can choose a riskier strategy if your child is further from college age. Ask a fund manager if you are not sure which is the best investment for you.
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Set up automatic investments. You can set up your account to withdraw money from your account every month. This means that your child's college fund will keep growing, and you won't have to remember to make the transfer every month.
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Repeat the process for each of your children.
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Tips & Warnings
If possible, you should contribute the maximum amount per year, as specified by the fund.
Other family members can also contribute to your child's college savings plan.
You may want to meet with a financial planner who specializes in saving for college. The planner knows the ins and outs of saving and borrowing for college and could help you put together a strategy that you might not think of on your own.
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