Save for your child's future.
Parents do their best to save for their children's college education, but sometimes they aren't aware of all of the options. U.S. News asked financial advisors what they're doing to save for their children's college expenses.
Invest in a 529 plan.
State-sponsored college savings plans have become popular in the last few years. These savings plans, named after a section of the federal tax code, are exempt from federal taxation and often include state tax deductions. States offer traditional investing options like mutual funds or age-based options that shift their asset allocation as children get closer to college. Lisa Roll, a financial advisor in Warren, New Jersey, uses the age-based track for her children.
Set up a custodial account.
Under the Uniform Gift to Minor Act or Uniform Transfer to Minor Act, parents can set up custodial accounts. Rather than opening a 529 account, Ron Portell, a financial advisor in St. Louis, used this strategy to save untaxed money for his children's education. The act allows a minor with an appointed custodian to own assets that can be used for purposes other than college if necessary.
Use a Upromise credit card.
The Upromise cash-back program is a no-hassle way to save, Roll says. You can apply for the Upromise credit card and receive money back when you dine out, fill up on gas and more. When you shop online with its retail partners, the program puts 5 percent of the cost toward your children's education. In many cases, it can directly transfer to your 529 account.
Put unexpected money in savings.
"Apply any bonuses or unexpected money toward college savings," says John Bohnsack, a financial planning associate based in College Station, Texas. One easy way to put money toward your children's college savings is to use your end-of-year bonus, since it does not interfere with your budget.
Split gift money and allowance.
Putting a fraction of your children's gift money and allowance toward college savings can add up. Half of any money Bohnsack's children receive on holidays and birthdays goes toward their college education. Roll takes this approach one step further. She uses an envelope system, letting her children use them to allocate money to four funds: long-term savings, spending, college savings and charity.
Prepay your mortgage.
"Currently, we are working toward paying off our mortgage by the time my oldest daughter is 16," Bohnsack says. Paying off your mortgage sooner will allow you to invest more heavily in your children's education during the years leading up to their first semester in college.
Sign up for the SAGE Scholars Program.
SAGE Scholars, a tuition rewards program, is one way Roll supplements her children's college savings. By investing in SAGE Scholars' financial partners, such as the Philadelphia Federal Credit Union, you can receive 5 percent annually in tuition points on your investment. Each tuition point equals one tuition dollar. These points are accepted at more than 300 universities and can be used to pay up to 25 percent of your children's tuition.