At one time or another, every parent has dreamed about sending their kids to the college of their dreams while setting them up for a prosperous future. Just ask Aunt Becky! Unfortunately, reality inevitably sets in as the stark realization that those dreams come at a hefty cost of anywhere between $100-300k per student.

While there is no magic solution that will suddenly make college tuition more affordable, there are still a handful of best practices that people can take in order to save for college. When used in conjunction with a realistic set of goals and expectations, much can be done to make higher education more affordable and, thus, more attainable.

529s and Other Accounts to Save for College

Since their introduction over 20 years ago, 529 accounts have become the most popular means of saving for college due to their tax advantages and ability to use the investment markets rather than cash-based instruments for superior long-term growth. Distributions are taken tax-free when used for qualified expenses – including tuition, books, and room-and-board under certain circumstances.

While other types of accounts can be explicitly used to save for college – primarily UTMAs, UGMAs, Coverdells, and various prepaid plans – none feature the wide variety of investment choices and tax efficiencies of 529 College Savings Plans. However, as convenient and beneficial as 529 plans can be, they still have substantial restrictions that are important for every participant to understand to make certain a 529 is appropriate for their specific demands and goals.

For investors looking for an account that can be used for college and anything else, a standard non-qualified investment account will usually serve those needs nicely since there are no restrictions. However, since nothing is perfect in life, those accounts lack the tremendous tax benefits afforded by 529 plans on qualified distributions.

Keep College in a Proper Perspective

While all parents want the best for their children, keeping the costs of college in a proper perspective is critical in making sound financial decisions. Aside from the discussed ways of saving for college, a wide variety of financial aid is available – including scholarships and grants – to help further offset higher education expenses.

While making drastic financial decisions like pulling equity out of your home and assets out of your retirement accounts might be noble and well-intentioned. Still, it could prove to be catastrophic to your own retirement dreams. In other words, saving for college should involve doing what you can for your children without jeopardizing your own financial stability and future.

Want to learn how to pay for college down to the penny, or need help with your financial plan? We’re here to help! Simply click here or call (763) 445-2772 to schedule a complimentary consultation today!