Alexandra Grablewski
Whether it's for
college or a safety net, here are some simple ways to save money for your
little one.
Start
ASAP. Don't
have a lot of disposable income? Not a problem. "New parents can begin at
a bank or credit union and start a savings account with the minimum balance,
says Greg Meyer of Meriwest Credit Union in San Jose, CA. "Typically,
credit unions have very low minimums, often in the vicinity of $20 or less to
open a savings account that will have no fees. This makes it easy for young
parents to get started."
Pay yourself first. "Your child's college savings
account is not the most important savings bucket to fill," says Farnoosh
Torabi, host of Financially Fit on Yahoo! Finance. "Make
sure your rainy day/emergency fund and retirement accounts are well filled
before allocating money to college savings. The fact is, college lasts four
years, while retirement lasts 30+."
Save, then
spend. Once you've established your
budget, pay baby every month just like you pay your other bills, says
Darren Scrimpshire, CRPC, a managing partner with Sapient Financial Group in
San Antonio, TX. "If you wait to see what's left at the end of the month,
chances are there'll be nothing left."
Look into a 529. The 529 savings plan is a
state-sponsored tax-advantaged savings plan and every state has at least one
type of 529 plan, explains Torabi. "It works much like a 401(k) or an IRA
where your money is invested in mutual funds. It is free from federal taxes and
many states offer state income tax deductions for all or part of the
contributions made by the donor. Withdrawals must be used for school expenses
including tuition, room and board, textbooks, supplies, fees, etc."
According to a survey by Fidelity Investments, parents who save in a 529 plan
can afford to pay for 36 percent of the expected college expenses. You can buy
a 529 plan either directly from the state of through a broker.
Sign up with Upromise. By creating a free account with
this site, you can earn Get 1%-25% back from eligible purchases at more than
800 online retailers when you shop through Upromise.com. You can also earn
rewards at participating restaurants, grocery and drug stores. You can then
transfer any money you earn to a high-yield savings account or a 529 plan.
"It's not going to be a lot of money, but it's something," says Adam
Koos, president of Libertas Wealth Management Group, Inc. in Columbus, Ohio.
Be realistic. The entire financial burden of
college shouldn't be solely on you and your spouse, says Torabi. "Between
attending an affordable school, scholarships, grants and working part-time,
your child should be able to help pay his or her way through school, as well.
The financial burden is not all yours. Do as much as you can, but don't
compromise your other financial needs because of it."
Get life insurance. Life insurance can be a major
financial life preserve for your children, as it will be a source of income for
them after you pass. "There is no 'one-size-fits-all' way to calculate how
much life insurance you need, but you can get a solid estimate by analyzing your
family's financial needs," explains Torabi. "Calculate how much
replacement income your family or dependents will need in order to maintain
their current lifestyle."
Source >www.parents.com
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