If you are a new parent, you want to start thinking about your child’s college tuition. Sure, your son or daughter may only be a day old, and you may just be getting used to parenthood, but it is critical that you start thinking about saving. Typically, a child’s college tuition could cost between 20K and 30K per year – not including inflation. Then, of course, you have all the other costs, like living and food expenses. On top of that, you have all the miscellaneous bills that start to add up.
This is why you want to start saving as early as possible. However, it is the way you save that will allow you to hold on to your money. The last thing you want is for taxes to slash the college capital in half or more. Here are some common college savings mistakes that new parents make.
- Not Putting the Money in a Tax Protected Account
One of the first mistakes that new parents make is not putting money in a tax protected account. If you put the money in a normal account, or even a CD, the money could be taxed, which could halve the money you have in the fund by the time your child is ready to go to college.
- Not Saving Early Enough
Another mistake that parents make is not saving early enough, which can cause all sorts of problems. One of those problems is not having enough, especially if your son or daughter wants to go to a more expensive college. You never can predict what your child may want to do with his or her career. You could be sending your brood off to a college with a high tuition, which will require more money and savings. The best way to rectify this mistake is to save earlier.
- Not Starting a Family Savings Pool
Of course, one of the best ways to make sure there is money in your son or daughter’s college fund is to make sure that your family is pitching in. When your child is born, you want your friends and family to donate a small portion of money to this fun in lieu of flowers or cards. This family fund could mean the difference between your child getting into Norwich University or becoming a fry cook somewhere.
- Not Using Other Benefits to Include in the Fund
If you have a job with a retirement fund or a 401(k), you could be redirecting some of those funds into a college fund for your child. This can be a great way to supplant the money you have been saving on your own. Moreover, you may have other accounts that you can diversify and put into your child’s college fund.
- Not Taking Risks
On top of everything, many parents don’t take risks. Of course, you don’t want to gamble everything away, but you do want to divvy up a small part of the pie and then put the capital into high yielding trading accounts. You could turn a small amount of money into a large amount of money if you are smart. In the end, a financial adviser can help with all of this.