Our boy is still very young, but I’ve always believed that you can never save and prepare too soon. Children come with so many expenses that always seem to pop out of nowhere, so it is always best to save up for those times. And, even if you do not have any unexpected expenses when they are younger, you will more than likely have to pay for a wedding or college down the road...and that is very expensive! So, start saving up now. If you are not sure where to start, let me walk you through it!
Path2College Georgia 529 Plan
One of the most popular ways to save for college is by using the statewide college savings plan, which is also known as a 529 plan. If you are not familiar with a 529 plan, you are allowed to make after-tax contributions into an account that you own. That means for federal purposes, you are taxed on it, but you will get a credit on your Georgia return. You own the account, but you name your child as a beneficiary. As you invest money, the income and gains in those investments do not get taxed while in the account and as long as you use the funds for educational expenses, the investment gains becomes tax-free, which is a huge perk. 529 plans typically come with very high contribution limits, letting you save as much as you want (or almost as much) towards your child’s education. You also have the right to switch beneficiaries, which is a big perk for families with more than one child.
If you are having trouble saving, then you might need to consider living with less. If you are paying too much in car payments or home payments, try getting a more affordable home or car so that you can put more money towards your saving account(s).
Education Savings Account
Dave Ramsey gave me this idea! An ESA is different from a Georgia 529 plan. It allows you to save $2,000 (after tax) per year, per child. It is tax-free and if you save $2,000 a year for 18 years, you would invest $36,000. Typically, you will earn a much higher rate of return with an ESA than a savings account and you will not have to pay taxes when you withdraw the money.
UTMA or UGMA
Another Dave Ramsey tip… He says, “An UTMA/UGMA differs from ESAs and 529 Plans in how they aren’t designed just for education savings. The account is in the child’s name but is controlled by a custodian (usually a parent or grandparent). This person manages the account until the child reaches age 21. At age 21 (age 18 for the UGMA), control of the account transfers to the child to use any way they choose.”
What To Do Before You Start Saving?
Saving for your child's education is essential and if you can afford it, the earlier you start, the better. Getting a head start gives your money more time to grow over the long term, and rebound after any dips. It also means you can recalibrate if your child seems to be on-track for scholarships related to sports or academic achievements, or if he or she decides to forgo college. Before you launch a college savings plan for your kids, you need to make sure you have your other financial ducks in a row. First, you should focus on reducing your credit card debt. Then, you will need to save for any unexpected expenses. Once you have those ducks in order, start saving for college! If you are struggling to pay off high-interest credit card debt, try to sell some jewelry that will help you knock that number down. Chapes-JPL can help with just that. They can help you achieve your financial goals by providing low-interest asset loans, cash for valuables, or even a small business loan in Atlanta. They say, “Chapes-JPL has one simple goal, to provide affordable asset loans on jewelry, gold, diamonds, watches, and other valuable assets, at a low rate and at fair value. We offer loans as low as $100 and as high as $5 Million at some of the best interest loan rates in the industry. Unlike typical pawn shops that lend at extremely high rates (and in public storefronts for the world to see), Chapes-JPL provides loans at low rate and in private financial offices.” They have built their reputation on trust and security, experience, fast cash, being discreet and confidential, and their low rates. If you need help paying off your high-interest debt so that you can start saving for your kids, give them a call!
There are so many ways to save for kids - especially when it comes to larger education funds. These are a few ways to bulk up your savings accounts. Do you have any other ways?