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Make a Plan for Your Child's College Savings

piggy bank with graduation capWith college costs rising faster than the inflation rate, building a nest egg for your child’s education is vital. Use the information below to help generate a strategy.

Make a Plan

Wjhen your child is still young, it is impossible to know what kind of school they will attend, but the important thing is to start saving today, even if it is only a small amount.

Compound interest can be your friend. Use this calculator to discover how much a small amount of monthly savings might grow if you start today.

Research future college costs of potential schools here. Include community colleges, technical schools and private universities.

Decide what percentage your child will cover. Few parents pay the entire cost because scholarships, loans and financial aid cover a portion.

College Savings Plans

Use the following methods to saving during each of your child's life stages.

Elementary school: Riskier, long-term investments that yield higher returns such as stocks and mutual funds.

Middle school: Less risky, but lower return investments, such as short- and intermediate-term bonds and interest-earning money market mutual funds.

Graduation from high school: Low-risk investments.

More commonly there are several investment and savings accounts meant specifically for families saving for higher education.

529 College Savings Account: These accounts let the government do all the work. The state makes investments and automatically decreases the risk as your child gets closer to college. View your state's specific plan. Contact a broker to set up an account.

529 Prepaid Tuition Account: If you know you want your child to go to a certain state or municipal university, this plan allows you to purchase tuition credits at today's prices. That means you will pay inflation-free college tuition for your child.

Coverdell Account: A Coverdell Savings Account (also called an Education Savings Account or ESA) takes care of the investing for you, putting savings up to $2,000 a year in stocks, bonds and mutual funds.

Trusts, money market accounts, Roth IRAs and savings bonds also can be useful for saving. 

[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by the National Endowment for Financial Education.]

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