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Saving for Your Child’s College Education

College is increasingly expensive. If you are going to help your child pay for an education, you need to plan ahead. Now would be a great time... even if you don't have any kids yet.

Articles by Betterment Editors

By the Editorial Staff
Betterment Resource Center  |  Published: March 28, 2013

A 529 plan is an investment account that allows money to grow tax-free – as long as withdrawals are used for qualified educational expenses.

A Betterment account can help you save long-term for other expenses related to your kids' college education.

Most parents want to make sure that their children get the best possible start in the world.

For some, this means providing a good education. However, college is increasingly expensive. If you are going to help your child pay for an education, you need to plan ahead. Now would be a great time… even if you don’t have any kids yet.

It bears mentioning that there’s a school of thought out there that you might not want to help pay for your children’s education because by doing so they don’t take ownership of the educational process.

Regardless of which side of this argument you fall on, by saving now you have the choice when it’s time for them to go to college. If you don’t save now, you have no choice but to have them “take ownership of the educational process”.

So, if you want to save, what can you and your child do to help fund a college education? Try:

    • 529: This tax-advantaged educational savings account can help you grow your children’s education fund. It’s an investment account that allows money to grow tax-free—as long as withdrawals are used for qualified educational expenses.
      You can start contributing as early as you want, and your children can contribute a portion of their money to the account as well. If you don’t have kids yet but want to start saving early, you can set up the account in your name now and update it later. Be sure to monitor the fees associated with 529s to get the most out of your money. (At present, Betterment does not offer 529 plans.)
    • Other investments: It’s also possible to go with other savings and investment options, like a Betterment account. Set up a goal for future college tuition and work towards saving up the funds over time.
    • Scholarships: Encourage your children to prepare to apply for scholarships. Through good grades, extracurricular activities, and volunteer experiences, your children can become the types of well-rounded students that colleges look for. Start your scholarship search, and encourage your children.
    • Grants: If you qualify, there are grants available for students to apply for. Look into the possibilities; you might be able to get some way of partially funding your children’s education.
    • Look for good value: There are many schools that offer good value. In-state public schools often cost less. Additionally, you can look to smaller schools. Also, consider schools where you graduated. Some of them have legacy programs that offer discounts to the children of alumni.
    • Student loans: And, of course, there are student loans. While this isn’t often a first choice, it is still an option. Your children can take out federal student loans with lower interest. Sometimes, the interest is even subsidized while the student is in school.

Whether you fund the entire tuition, or help your child plan for the future, the earlier you start the more likely you (and your children) will be able to handle the cost.

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