With the cost of higher education continually rising, it makes sense to save for college early. Putting a savings plan in place well in advance will help you be more prepared to pay for college when the time comes, so start today. There are some simple, low risk options available that will help you save for college, including Savings Bonds.
The Treasury Department is a good source of information for learning which type of bond is best suited to your needs. Savings Bonds are also a handy way for relatives to help you save for college. Many grandparents give bonds for birthdays and holidays instead of or along with other gifts. If you receive money for such occasions, consider using that money to purchase Savings Bonds.
Money Market Accounts can also help you save for college. They are very similar to your average savings account, are available everywhere, and offer a higher rate of interest. You’ll earn around twice as much as with typical savings accounts. There is usually a minimum balance required, but overall, this is a good way to save for college. It’s a good strategy for someone who doesn’t feel investment savvy, doesn’t have a lot of money to invest, or prefers not to take much of a risk.
Certificates of Deposit (CDs) offer another opportunity to save for college. You determine the amount you want to invest and for how long. The more you invest, the greater your return will be, and long term CDs offer a higher rate of interest than short term ones. Withdrawing money from a CD early will result in penalties, so be sure to choose the right option.
While these options are available for any savings plan, there are also 529 plans or 529 programs, which are specifically designed to help you save for college. You may end up better off in the long term by stashing your cash in a 529 plan, because you won’t have to pay federal income tax on your earnings if the money is used for qualifying college expenses.
While savings accounts and bonds are good places to store your earnings, you should also focus on generating as much savings as you can to continually add to the accounts. One way to maximize your monthly savings is to cut down on expenses like groceries, apparel, hobbies, and other forms of shopping. You can use browser extensions like the Capital One Shopping app to get information and updates on coupons and price comparisons across multiple retailers.
The options above are listed for informational purposes and do not constitute investment advice. You should speak to a qualified financial adviser before making a decision. As you consider which options you want to employ to save for college, you may also want to contact the financial aid department at your school of choice and ask about their pre-paid tuition plans.