Education is easily one of the most fundamental traits people hold to high standards. It is often seen as the key to success, and rightfully so. A person’s level of education can usually determine their future opportunities and earning potential. However, education is also relatively expensive, even in the United States.
The average tuition in secondary schools is around $10,000, that’s a fraction of what an average household in the United States would earn. However, it’s also the same average amount that people would pay for their mortgage.
Moreover, tertiary education in the United States is one of the most expensive globally. The average tuition fee for a private non-profit college is around $35,000. And that’s not even taking into account other associated costs like room and board, books, and transportation.
It’s no wonder that people are often saddled with student loans that can take years to pay off. In fact, according to Forbes, the average graduate in the class of 2016 has $37,172 in student loan debt.
Given the high cost of education, it’s essential to start saving for your children’s future as early as possible. Here are five ways you can do that:
Start a High-Yield Savings Account
A high-yield savings account is a great way to start saving for your children’s education. Many banks and credit unions offer these accounts with interest rates much higher than the average savings account. Because of this, your money will grow faster over time, given that you don’t use it as much.
Many people also don’t think much when they open their savings accounts. But here’s a tip that most people forget, different banks offer different interest rates. So it’s in your interest to find the best banking institution to open your savings account with. A banking institution that offers high return rates and bonuses is an excellent place to start. You should also consider a bank that offers online banking. An online banking option makes it far more convenient to manage your savings account.
Invest in a 529 Plan
A 529 plan is a tax-advantaged savings plan that helps families save for future educational expenses. It’s one of the most popular ways to save for college in the United States.
There are two types of 529 plans: prepaid tuition and college savings plans. With a prepaid tuition plan, you can purchase units or credits at participating colleges and universities at today’s prices. This means that your child will be able to attend school without worrying about future tuition hikes.
With a college savings plan, you can save and invest money in an account specifically for future educational expenses. For example, you can use the money in the account for tuition, room and board, books, and other associated costs.
One of the best things about 529 plans is that they offer tax breaks. The money that you contribute to the plan grows tax-deferred. This means that you won’t have to pay taxes on the funds until you withdraw them. And if you use the money for qualified educational expenses, you won’t have to pay any federal taxes on the withdrawal.
Save With a Roth IRA
A Roth IRA is another excellent way to save for your children’s education. It’s a retirement account that offers tax-free growth and tax-free withdrawals.
The money that you contribute to a Roth IRA grows tax-deferred. This means that you won’t have to pay taxes on the funds until you withdraw them. And if you use the money for qualified educational expenses, you won’t have to pay any federal taxes on the withdrawal.
Roth IRA accounts also offer flexibility when it comes to withdrawals. You can take out your contributions without having to pay any penalties or taxes. And if you need to withdraw the money for non-qualified expenses, you can do so as well. However, you will have to pay taxes and penalties on the withdrawal.
Use a Cash-Back Credit Card
A cash-back credit card is a great way to earn money while spending money. Many cash-back credit cards offer rewards like 2% cash-back on all of your purchases. This means that you can make money while spending money on everyday items.
If you use a cash-back credit card to pay for your children’s education, you can earn rewards that you can use to offset the cost of tuition or other associated expenses. Just make sure that you pay off your credit card balance in full each month to avoid paying interest.
Saving for your children’s education can be a daunting task, but it’s worth it. By using one or more of the methods we’ve outlined in this article, you’ll be well on your way to ensuring that they have a bright future.