How do I involve my child in saving for college?

August 19th, 2013

According to a 2012 College Board report, tuition and fees at U.S. public universities rose 4.8 percent last year—more than double the inflation rate. The average annual price tag is now $20,000 for public schools and $40,000 for private institutions. With the cost of education going up, it’s never too early to start saving. And with a little thought, you can get your child excited about the process.

Many parents already know the value of Section 529 Plans. These accounts place no income limits on donors and currently allow contributions of up to $14,000 per beneficiary per year. The best part? Withdrawals used for qualified educational purposes are excluded from federal income taxes. To help your child understand the benefits of these accounts, suggest that they contribute money from birthdays, holidays and odd jobs to their 529 Plan. Tell your child that you’ll match every dollar he or she contributes; then show them the Plan statements so they can see the balance increase.

Earning good grades can help your child get into a good school AND help pay for it. Show your child the different scholarships and grants that are available to students who keep their GPAs up. You can also encourage your child to enter essay writing contests or other academic competitions where cash awards could be used for college.

To help you meet the rising costs of college, The First National Bank and Trust Company of Newtown offers Education Savings Accounts. Anyone can contribute to these accounts, including your child. And as long as distributions don’t exceed the amount spent on qualified higher education expenses, they are generally tax-free. To learn more, click here: http://fnbn.com/personal/education.html

How are you involving your kids in saving for college? We value your comments, advice and experiences.