Your parents may or may not have given you the best of education; but you will surely want to do your best for your child. Here are a few smart ways that work better than the traditional saving methods to help you get the kind of returns you want without much of risk:
#1:529 college savings account:
As per most financial advisors, the 529 plan is the smartest method to save up for your child’s college tuition. These accounts are sponsored by states and allow parents to invest their after-tax money in a tax-free way. In fact many employers even let their workers funnel money from their paychecks automatically into their 529 accounts. However, there are limits on how much you can contribute to these accounts, irrespective of your income level. That said you can do your research on the various investment options and fees and pick up any plan that is administered by any state.
#2: Prepaid tuition:
If you are worried about paying for the rising tuition fees in future, your best option would be to buy a prepaid tuition plans. In fact many states offer these, whereby you can buy your child’s tuition at the current rate and lock in a lower price, without worrying about the future rises. You can use that pre-paid tuition at just about any school in the country, not excluding the private colleges.
#3: Brokerage accounts:
If you are looking at getting some high returns with maximum flexibility, you can dedicate a brokerage account for your child and start investing your after-tax income into it. You could make sure the amount gets transferred into your brokerage account directly from your pay check. Since this is for long term make sure you choose an investment plan that comes with high dividend. If not for college tuitions, you can use the money for a wedding, a vacation or even for your living expenses.
If you are not prepared to take up any risks in your investment, your best bet would be to open a savings account dedicated to your child. Of course the interest rate would be very low; but by doing so, you can encourage your child to save money for his future. Go with a bank that offers teaching material for your child along with the savings account, has no requirement of minimum account balance, and does not charge any fees for low balances.
#5: Your employer's college savings plan:
There are many companies that directly deposit money into college savings accounts. Make it a point to find out from your HR department if they have such an option. This will make your savings easy and automatic. The best part would be that you will also get tax deductions. Some companies even offer private scholarships to the children of their employees.
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