If you have just given birth to your first child or you are considering a child, you need to decide how you plan on paying for college. Unless your child is extremely gifted and is able to receive a full-ride to a local university, you probably need to pay for the entire thing yourself. Due to this, the sooner you start saving up for your child’s college, the less they need to pay off on their own. While chances are you are not going to have the full college tuition saved up by the time they are ready for college, you need to look into the different ways to invest for college.
High-Yielding Savings Account
You can invest your money into a high-yielding savings account. Whether this is a CD or another account that you put your money it, if you simply deposit $100 a month for a full 18 years, your child is going to have access to $48,000, as long as there is an annual return of about eight percent.
Stocks are great for investing for college. With stocks, you just want to play it safe and take the advice of a seasoned professional. This is because while you can save a good amount of money by just depositing cash into the high-yielding savings account, tuition rises far faster than inflation, so the $48,000 now might only be work $20,000 in 18 years (or even less). With stocks, that are attached more towards the cost of inflation than just cash, you can increase the value of your investment and cut down on the money your child needs to pay out of pocket for college.
Mutual funds might be one of the best ways you can save for college. A mutual fund works much like a stock (after all, it is made up of hundreds of individuals stocks combined into one mutual fund), but the risk is lower. You might not see the sudden gains that are connected with a traditional stock, a mutual fund is going to help you expand your investments without taking all of the risks. After all, you do not want to invest a considerable amount of money, only to find out that you lost half of it due to a bad trade or because of a failing company.
529 Savings Plan
This is a solid savings plan not only to save for college but for a nice tax break as well. While you probably are only able to use the money in state, it free to use and it provides a federal tax plan so you are not paying taxes on the money you are depositing. You can even save an excess of $200,000 per beneficiary, which is great if your eventual child wants to become a doctor or another professional that requires countless years in expensive school.
All of these are really nice investment options to look into, when you are considering paying for a child’s college.