One of the things that most parents want for their kids is to graduate from college. After all, getting a degree would help them get a better shot of reaching their dreams and having a better future. The cost of college education is constantly increasing. Sending your child to a public college could cost you an average of $24,061 per year, while it could cost around $47,831 to send one to a private college. It’s important that you plan for your child’s college education so you can send them to a good school without putting your finances at risk. There are common mistakes that you should know when it comes to saving on college tuition fee for kids. It’s important to learn about them to avoid making these blunders. Here are some of them.
Depending on Your Retirement Plan
Your retirement plan is meant to allow you to live a comfortable life when you retire. Some parents use this as an option to pay for their children’s college tuition. While you can make withdrawal to your retirement plan before you even reach your retirement age, there are consequences for doing so. For instance, early withdrawal from your IRA has a 10% penalty. Companies have varying terms when it comes to their 401(k) plans. Borrowing money from this, may disqualify you from getting matching funds from your employer. Moreover, you may be asked to pay for the money borrowed within a short time in case you were laid off.
Not Saving Early
You may think that it’s still too early to save for college when your child is still a baby or in his early years. Time flies really fast and before you know it, your kid is already in his senior year in high school and is about to embark in the journey of college life. When it comes to saving for your child’s college education, the earlier, the better. Even the small amount that you save would accumulate in the long run. You don’t have to make large sum of savings if you start earlier because of the length of time that you have to come up with the money that you would need for this purpose.
Expecting a Full Scholarship
Your kid may be intelligent or his athletic skills are promising. While he may have the chance of landing a full scholarship for college, this is something that’s uncertain until he was offered with it. There’s also a huge possibility that he would not earn it. This is why the best thing to do is to save for your kid’s college tuition. In case he gets the full scholarship, you could use the money that you saved for his other expenses like boarding house, foods, transportation and projects.
Closing 529 Savings Account When Your Child Enters College
A 529 savings account is savings that’s aimed to be use for your child’s qualified college expenses including tuition, room and board, books, computers and other mandatory fees. What’s good about this savings is that it earns tax-free interest. This could add up in the long run, especially if you’ve been saving for a long time. Many parents close their 529 savings account as soon as their children enter their first year in college. This should not be the case as you may continue saving under this account as long as your child is still in college in order to continue earning tax-free interest, as well as be ready for unexpected expenses that may occur.
Avoid these mistakes when planning for your child’s college tuition to prevent financial difficulties and to ensure your kid’s college education.
Featured and 1st image by Sbcaphil (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons
2nd image by 401(K) 2012 [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons