While there are a number of scholarships and financial aid packages available to college students, these will rarely pay for all the costs of higher education. Saving money early and wisely can help avoid the student or parents being forced to choose between taking on extensive loans or sacrificing a college education.
The traditional way of saving for college tuition is to start a bank account and add to it on a monthly or yearly basis. While this is a perfectly sound method it will only garner a small amount of interest over time. This same money can be placed into certificates of deposit (CD’s) to make even more money, though it will untouchable until the CD matures. Banks and credit unions offer CD’s at competitive rates, and there are more and more online financial institutions that offer even higher rates of interest on savings accounts or CD’s for greater convenience.
A very common form of education savings is to open a Section 529 College Savings Plan or Prepaid Tuition Plan. These are offered by every state in various forms. A prepaid tuition plan guarantees future tuition with the state college system, while college savings plans have more flexibility but do not come with any guarantees. Prepaid accounts allow people to purchase shares of tuition that will grow at the same rate as tuition – even years later. These accounts can also be added to by anyone and are exempt from taxes at the state or local level.
Investing money for college tuition can yield great returns but is also very risky. Since there is no such thing as a sure investment, it is up to the parents to decide how much they are willing to risk. This method can generate enough income for a four-year degree with very little startup capital for those who are willing to risk taking a loss and having to contribute even more money as the tuition bill draw ever nearer.