Parents of four-year-old children today will be staring down college tuition bills of approximately $200,000 or more by the time they get their high school diplomas. How to find the money to pay those kinds of heavenly bills can be cause for concern, but fret not. If your child is smart, and you are too, you will be able to send the kids to the school of their choice while waving to them from your beautiful retirement home in the mountains, on the beach, or on that pristine golf course.
Whatever you do, do not rob your 401k or retirement savings to pay for college. There are many vehicles that can take your children through secondary education, but none other than your own hard work that can see you through retirement. Pay for retirement, first and foremost, then work on the college fund.
Stocks are the best bet for keeping pace with inflation and rising college costs, offering the best return for your money. Tucking away $100 each month for 18 years will return $48,000 at 8 percent annual rate of return. While that doesn’t quite make the full four years of college tuition bills, the slack can be taken up with loans and grants.
Loans for college are granted with much more lenient qualifications than regular business or home loans. Plus, there are tax breaks. Graduates pay back loans with pretty forgiving rates, and parents get tax breaks while paying for kids in college through the American Opportunity Tax Credit and the Lifetime Learning Credit.
A 529 college savings plan is another option, carrying no income limits and allowing $200,000 per beneficiary, with no age limit on the beneficiary. The uPromise savings plan that awards shopping, dining, and works sort of like a cash back credit card, putting money into an account when you spend, might work up a little college nest egg.
Failing all that, there are also scholarships for promising academics, sports, and civic leaders, doling out helpful funding for deserving undergraduates. Just about every large corporation, and every social cause, has scholarship money to give away. Make sure to point your matriculating high school student in that direction, setting up meetings with counselors, and even college scholarship application advisors, early in their high school career. Knowing what targets to aim at improves successful bulls eye hits.
One final note on plumping up your child’s bank account: don’t. If you want to win loans, grants, and scholarships, know that many assessments are made weighing the child’s income much more heavily than that of the parents. If you’ve dumped a boatload of cash into junior’s accounts to save on taxes, that may work against any college assistance being awarded.