Building savings for college in this day and age can seem challenging, but we’re here to help. Saving for college is highly beneficial because it lets you or your loved one decrease the amount of debt taken on in student loans. Planning ahead will help offset the costs of tuition, books and supplies, and there are several tips that you can use to start creating a college fund for yourself or your child.
Five Ways to Save for College
Buy Savings Bonds
One of the biggest benefits of savings bonds is that they're a low-risk way for people to invest their money, either for a beneficiary or for themselves. Anyone can buy a savings bond for someone else, making them a great gift for a parent or grandparent to give a child when they are young. Plus, the earnings are tax exempt at the state level and tax deferred at the federal level.
Typically, a bond is purchased at about $25, but the value of the bond appreciates to $50. Bonds can also be purchased for larger amounts, and the value will appreciate throughout its life. One of the downsides is that a savings bond takes many years to reach full maturity, so they're not the best gifts to give kids who are already in their teens because they won't be mature for many more years.
Typically, a bond is purchased at about $25, but the value of the bond appreciates to $50. Bonds can also be purchased for larger amounts, and the value will appreciate throughout its life. One of the downsides is that a savings bond takes many years to reach full maturity, so they're not the best gifts to give kids who are already in their teens because they won't be mature for many more years.
Invest in a Roth IRA
A Roth IRA is a type of investment plan in which the money can be used for several things. Typically, you might hear about Roth IRAs in connection to retirement plans, but you can also use them to save for college. Roth IRAs usually have a penalty for people who withdraw too soon. However, the 10% penalty is waived for people when they use the money for school-related items, such as tuition, books, and more. As with most types of investments, it's best to start early to earn enough money to pay for school.
Open a Separate Account
When you're trying to save for something this big, one of the easiest ways to ensure that you don't spend your savings on other things is to open a separate account. The benefits of opening a separate savings account is that it's simple to do, and you can immediately start earning interest on the money that you put in the account. You won't touch the funds once you deposit them, making it easier to build your assets.
This is an especially good option for an adolescent who has begun working an after school or summer job because it’s easy to set up. Plus, it's a great way for your teenagers to start learning about saving money, and they can take the money out as soon as they start college.
This is an especially good option for an adolescent who has begun working an after school or summer job because it’s easy to set up. Plus, it's a great way for your teenagers to start learning about saving money, and they can take the money out as soon as they start college.
Parents and Family Members Can Open a 529 Savings Plan
If you're over the age of 17 and would like to help a minor with their future college expenses, a 529 savings account might be just the right thing for you. Anyone, including a parent, grandparent, cousin, friend or anyone else who knows the beneficiary can open a 529 account for when they go off to college.
Earnings grow tax-free and are not taxed when they’re used to pay for education. If you use if for other expenses, you will pay taxes and a 10 percent penalty on the earnings. A 529 account is that it's extremely flexible for the future student. The only requirement is that they go to a college that's eligible for federal student aid.
Earnings grow tax-free and are not taxed when they’re used to pay for education. If you use if for other expenses, you will pay taxes and a 10 percent penalty on the earnings. A 529 account is that it's extremely flexible for the future student. The only requirement is that they go to a college that's eligible for federal student aid.
Start Investing in a Mutual Fund
Mutual funds are a way for people to invest in a range of financial assets with a lower risk. They're professionally managed, too. One of the biggest advantages to a mutual fund is that the money can be spent on anything. This type of investment can be used to save for college but isn't specifically designed for it.
You also need to be aware that the money that you gain in a mutual fund is subject to tax. This might be a suitable option for families whose income is too high to receive financial aid.
You also need to be aware that the money that you gain in a mutual fund is subject to tax. This might be a suitable option for families whose income is too high to receive financial aid.
When you're saving for something big, it's always best to start early. Most of these types of savings plans are designed for parents and grandparents who are interested in helping a young child. If you want to learn more about how you can help a young person get financially ready to pay for college, contact Truliant to learn about all of your options.
References:
https://www.magnifymoney.com/blog/earning-interest/how-savings-bonds-work/ https://www.savingforcollege.com/article/6-ways-you-can-save-for-college
Most 529 plans are sponsored and administered by states. State tax benefits vary among the states, and some offer residents additional tax benefits if they invest in their own state plan. Please consult your tax advisor for more information.
Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Truliant Federal Credit Union and Truliant Financial Advisors are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Truliant Financial Advisors, and may also be employees of Truliant Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Truliant Federal Credit Union or Truliant Financial Advisors. Securities and Insurance offered through LPL or Its affiliates are:
Not Insured by NCUA or Any Other Government Agency | Not Credit Union Guaranteed | Not Credit Union Deposits or Obligations | May Lose Value
Truliant Financial Credit Union (“Financial Institution”) provides referrals to financial professionals of LPL Financial LLC (“LPL”) pursuant to an agreement that allows LPL to pay the Financial Institution for these referrals. This creates an incentive for the Financial Institution to make these referrals, resulting in a conflict of interest. The Financial Institution is not a current client of LPL for brokerage or advisory services. Please visit https://www.lpl.com/disclosures/is-lpl-relationship-disclosure.html for more detailed information.
The LPL Financial registered representative(s) associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.
References:
https://www.magnifymoney.com/blog/earning-interest/how-savings-bonds-work/ https://www.savingforcollege.com/article/6-ways-you-can-save-for-college
Most 529 plans are sponsored and administered by states. State tax benefits vary among the states, and some offer residents additional tax benefits if they invest in their own state plan. Please consult your tax advisor for more information.
Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Truliant Federal Credit Union and Truliant Financial Advisors are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Truliant Financial Advisors, and may also be employees of Truliant Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Truliant Federal Credit Union or Truliant Financial Advisors. Securities and Insurance offered through LPL or Its affiliates are:
Not Insured by NCUA or Any Other Government Agency | Not Credit Union Guaranteed | Not Credit Union Deposits or Obligations | May Lose Value
Truliant Financial Credit Union (“Financial Institution”) provides referrals to financial professionals of LPL Financial LLC (“LPL”) pursuant to an agreement that allows LPL to pay the Financial Institution for these referrals. This creates an incentive for the Financial Institution to make these referrals, resulting in a conflict of interest. The Financial Institution is not a current client of LPL for brokerage or advisory services. Please visit https://www.lpl.com/disclosures/is-lpl-relationship-disclosure.html for more detailed information.
The LPL Financial registered representative(s) associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.
Additional Tips to Save for College
Savings and Budgeting
How to Make a Budget
Best Financial Practices for High School Graduates
Talk with Truliant
Call or schedule an appointment at one of our branches to speak to a representative about getting started saving for college or if you want a second opinion on what you already have in place.