For most parents, saving for their kids to go to college is the number one priority. They tailor their entire lives around this task, cutting down on expenses wherever they can. While the majority of parents believe that sacrificing their short term financial happiness is the key to saving for their child’s secondary education, there are a number of other mistakes that are made nevertheless.
But you don’t have to! Let’s take a look at the three most common errors and how they can be avoided:
Failure To Save
This mistake may seem like the most obvious, but in reality, there are many parents who do not even consider the concept of saving for their child’s college education until it is too late. Can you believe that a Sallie Mae survey that was taken recently stated that more than half of all parents did not have any sort of college savings plan set up for their children?
While some of these parents are unable to save because they do not have the disposable income to do so, others believe that they still have time. They mistakenly believe that their child’s needs are going to be covered by scholarships and financial aid. Parents should never make these assumptions and it is in their best interests to start setting aside money for their child’s college education as soon as possible. Rethink your budget and choose the cheaper option whenever you can, not forgetting about coupons you can get at such sites as Discountrue.com. Be it toys from Build-A-Bear, new clothes from Target or flight tickets at Hotels.com, you can save on practically everything!
There are so many little things you can do to reduce your weekly bills, switching to cheaper supermarkets, using store brand items instead of the big brand labels – there are a few ways of helping you to make that change in this money saving tips for thrifty families post.
- Being Too Safe
Parents who want to save for their child’s education typically place their money in low risk accounts. Certificates of deposit, savings accounts and checking accounts are usually favoured by risk averse parents. These are the easiest options, but they do very little to help families accrue money.
Luckily, there are 529 college savings accounts available. These plans allow parents to avoid losing a significant chunk of their child’s college savings each year due to taxes and certain 529 college savings plans can be adjusted to become more conservative as your prospective student grows older.
- Using Minor Accounts
Uniform Transfers to Minors Act and the Uniform Gifts to Minors Act were both used in the past by parents who wanted to put money in their child’s account, select investments that made sense to them and benefit from the lower tax bracket that their kid resided in. However, these rules have changed in recent years, so that most parents can no longer utilise this option.
Now, the account earnings are taxed once they reach a certain level, at the parent’s highest rate, instead of the child’s lowest. Parents who still wish to save for their child’s education with a custodial account can now choose a 529 custodial savings plan. The money is able to grow without negative impact on financial aid and taxes are deferred.