For parents who want to help finance their children’s education, it can be overwhelming, especially if there are multiple children to provide for. The good news is that it doesn’t have to be a stressful undertaking, as long as you make good decisions on the savings plan early on. The following mistakes are ones that are often made by parents from around the country so you can avoid them during your planning.
Low Interest Plans
Some parents decide early on that they want to put the money for their child’s college savings into a savings or checking account that is not going to give them a big return when the time comes for their child to enroll in school. While this may seem like less of a gamble, you’re going to be leaving a lot of money on the table that could otherwise be invested. The reason for this is because of the low interest rates that are associated with this type of account. Instead, look into a 529 college saving plan, which will allow your money to grow at a consistent rate.
Waiting too long
Basically, the sooner you can save for your child’s future, the better. The longer the money has a chance to grow, the bigger return on your investment when the time comes to pay for school. Figure out how much you can comfortably contribute and have it automatically deducted from your paycheck directly to the college savings plan.
Borrowing from your 401 k
If your child needs additional funds for their education, it’s difficult to not look at all avenues of providing this money for them. Borrowing from your 401 k is always an option, however, it’s not a very good one to make. These plans often have penalties for withdrawing early, such as no more company matching or needing to repay the amount within 60 days. Look into what the terms of your 401 k plan are and exhaust all other options before doing this.
Not saving at all
Sadly, many American families don’t save for their children’s education at all. Children who do not have any funds for their education are much more likely to have to take out thousands of dollars worth of student loans that they’ll have to pay back at a high interest rate, or they may decide not to continue their education at all after high school. If you find yourself with nothing to contribute to your child’s education, it’s important to know that there are options to help your child. Research scholarship options offered by the school of their choice and encourage them to apply for as many private scholarships as possible.