The Secret to College Planning (4 tips to set up your kid)

^{Read time - 3 minutes / Disclaimer}

Setting up your kid's education early:

- Helps them avoid loans.

- Gives them more options.

- Allows you peace of mind.

Unfortunately, college planning can be stressful.

Avoiding Student Loans

Student loans often mean:

- Tight budgets.

- Big payments.

- Large debts.

Helping your kid avoid these things allows them to start investing sooner.

A harsh truth about student loans—

They make life harder.

Harder to balance the bills.

Harder to take a vacation.

Harder to start investing.

I helped many people deal with student loans while working in banking.

They can be a tough thing.

I'll never forget the largest student loan I ever came across—

$450,000

The person's career—

A tax attorney.

Here's 4 tips to lower your kid's odds of needing a loan.

Let's dive in:

Tip 1: Open A 529

Start a 529 savings plan.

You can do this in your name before your kid is born.

It can be done easily through an online stock broker like:

- Vanguard

- Fidelity

- Schwab

Opening a college savings plan early gives your kid a big head start.

Tip 2: Build It Up

Save each week and invest.

For Example:

You start the 529 college savings plan 2 years before your kid is born.

- You save $50 a week.

- You invest monthly.

A common investment is—

The S&P500.

It's an index that tracks the 500 largest public companies in the US.

A common S&P500 investment is—

Vanguard (VOO)

Here's how saving and investing in a 529 plan might look:

If you're wondering where the 10% interest rate came from.

The stock market has grown 10% per year on average the past 3 decades:

Saving and investing regularly adds up to large amounts over long periods of time.

Tip 3: Transfer To Your Kid

After they're born, move the savings plan into your kid's name.

Call the company on your 529 statement.

Ask them to make your kid "the beneficiary".

The IRS allows you to change the beneficiary of a 529 plan to another family member.

Tip 4: Use The Money

Take money out of the 529 college savings plan for your kid as needed.

It can be used for things like:

- Tuition & fees.

- Room & board.

- Books & supplies.

- Computers & equipment.

Using money from a 529 plan to pay for college goes further because it's tax-free.

Conclusion

A 529 savings plan has many great perks.

But what if your kid doesn't go to college?

The IRS gives you a few back-up options like:

- Changing the beneficiary to a different family member.

- Converting the money into a Roth IRA account.

It's best to chat with a CPA first before doing these things.

For more info on 529 plans.

Try this:

Fidelity 529 College
Savings Plan​ 

Keep building 💰

See you next week.