Parents can become overwhelmed when they start looking into how much money is needed to fund their child’s college education. With the cost of a college education on the rise, it is important to be prepared for when the time comes to pay for your child’s higher education. Time coupled with understanding the proper steps to prepare for the financial responsibility will help lessen the financial burden of parents when it comes to financing your child’s college education.
It is never too early to start thinking about and saving for your child’s college education. The sooner you begin saving, the less money you will need each year to save leading up to paying for the education. Beyond saving early, parents can also reap the benefits of compounding interest. Compounding interest occurs when the interest is added to the principal; so that from that moment on, the interest that has been added also earn interest. Don’t let time get away from you when it comes to saving. Let time work for you and lessen the burden of having to come up with significant financial resources at the last minute.
Take advantage of tax incentives
There are a number of tax incentives for those looking for help when paying for a college education. Below are examples of the type of incentives you can take advantage of when paying for your child’s education. Talk to an accounting professional to learn more about each incentive.
• Individual retirement accounts
• Qualified tuition programs (529 plans)
• Coverdell Education Savings Account (ESA)
• Lifetime learning credit
• Tax-free education assistance
• Deduction for student loan interest
Tax related matters can be difficult to understand. Oftentimes individuals miss out on financial opportunities by simply not understanding what is available to them. Talk to your professional accountant about some of the options you can take advantage of when it comes to paying for a college education.
In 2010, reports indicated that the average cost of tuition and fees is $7,020 per year for in-state students and $11,528 for out-of-state students. Even if your child isn’t at the age to enter college, having an understanding of how much you can expect to pay by the time they enter college will help you prepare for the looming financial responsibility.
Look for Alternatives
There are some fantastic avenues to explore to help you pay for college. If you haven’t been preparing leading up to your child’s college education, there are some last minute things you should look into including grants, Stafford loans, and work-study programs just to name a few. Talk to a college counselor or an accounting professional about these specific options.