Every parent wants his child to get the best college education money can buy. There are options to consider for all Dads. Not all parents, however, can afford that education, nor do they want their children to accrue massive amounts of student loan debt.
If you have the luxury of being able to save some money for your child's education, here are a few common savings options:
Parents can invest money in a Coverdell Education Savings Account (CESA), which allows you to save $2,000 a year tax-free. However, CESA funds are considered student assets and can reduce the amount of student loans available to your child.
Every state offers at least one 529 plan, a state-sponsored college savings plan that allows you to choose the amount of money you want to invest and how aggressive you want that investment to be. Your investment grows tax-free, and it only requires you to fill out an easy form, usually available on your state's website.
After you file the paperwork, you begin depositing money according to the plan you chose. The investments are even managed by a professional. Plus, you can begin saving before your child is born.
You can save in a personal investment account — that is, a savings, stock, bond, or mutual fund account. These accounts give you more control to add or remove money, and you earn capital gains, interest, or dividends.
You pay taxes on the income each year you earn it, but these accounts give you more freedom to use the savings when and how you see fit. Depending on what level of access you want your child to have to the money, set it up as a trust that can be accessed with conditions or simply pay the tuition bills yourself.
If you don't want a college fund to go to a child if she decides not to attend college or if you don't want her to coast through high school knowing she doesn't need scholarships, set up a personal investment account in your own name.
If your child doesn't go to college, you can dispense the money at your discretion or keep it for yourselves. If she does go to college, you can reward your child for her hard work when the time arrives.
For parents looking to save for college, first make sure you have an emergency fund in place and your own future is secure with retirement savings. Don't prioritize your kids' education above these other crucial savings.
After all, you don't want your money tied up in a college savings account if your house burns down, and although there's no such thing as a retirement loan, generations of college students have been taking out student loans to pay for higher education.