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It’s no secret that college is expensive, and trying to save for that large of an expense is a difficult task for parents and students.
Here are three ways you can start saving for college:
529 college plan: 529 college savings plans work similarly to a 401(k). Parents can set up the savings plans with tax-free investment options. Parents can choose how aggressive to be with the plans based on how old their children are. For younger children, parents can be more risky, but with older children they might want to be more conservative.
Pre-paid tuition plan: For parents who know where their child will attend college, a pre-paid tuition plan might be a good option. If parents know their child will attend an in-state public school, the plans let parents buy tuition credits at the current prices. These allow parents to store up credits, but they are not at-risk of losing money based on the stock markets.
Roth IRA: Parents can open a Roth IRA in the name of their working children to save money for college. Roth IRAs can’t be taken out penalty-free until the investors are over the age of 59.5 years. However, the program does allow investors to withdraw money for certain expenses, including education.