Setting up a college fund for your kids is a rite of passage for every parent. Of course, there is more involved in creating a good sized fund than simply opening an account at the nearest bank. If you want to make sure that your kids’ college fund is as large as possible by the time they graduate from high school and the tuition payments are due, here are some of the steps you need to take.
1. Choose a high yield saving account. Every bank has different types of savings accounts with different interest rates, perks, etc. If you want your money to earn as much money as possible, you will do your research and choose the account that gives you the best return on your investment. Make sure that the account you choose offers compound interest as well as a high interest rate.
2. Use credit cards more often to help you find the cash you need to save up for your kids’ college educations. Search around for the top credit card offers available to people in your area. You want the card to come with a low interest rate as well as rewards points for every day purchases as well as the bigger things you want to buy. And, of course, remember: don’t charge more than you can afford to pay off within a month or two. Credit cards are a great way to stretch your budget but they shouldn’t become your budget.
3. Set money aside every month. Putting in a couple of hundred bucks now, even with compound interest, isn’t going to help you very much in a decade and a half when the tuition bills are due. Even setting aside as little as ten dollars a week (though twenty is better if you can afford it) is enough to ensure that your child has a good chunk of change waiting to help them fund their educations. Use a compound interest calculator to show you the kind of growth your deposits can have to keep yourself motivated for saving.
4. Do not dip in to this fund for anything. Dipping in to fund things—even things for your kids like club membership dues, a car when they’re old enough, etc—can hurt their future tuition payments. The trick to earning as much interest as possible is to let money accumulate. More importantly, many banks will penalize an account that is dipped into before it has a chance to really become anything.
5. As you accumulate funds, roll them over into even higher interest rate yielding accounts like bank CDs, etc. Talk to your bank about this process to make sure that you don’t get penalized the same way for rolling over as you would for dipping into.
These are just five things that you can do to help set your kids up for college. If you follow them all, you might even be able to fund your child’s entire undergraduate education! Good luck!
Consideration was given for the editing and posting of this article”