Investing For Your Children’s College Fund

Depending on how old your child is, it could be an arm and a leg sending them to college. It’s always best to start as early as possible, so that you have enough time to get the compounding effect on your investments. If you wait too long you’ll just have to take out student loans and work on paying those in a timely manner. Ideally you’d want to start an investment account when your child is born so that you have a full 18 years to let it do its thing. Realistically, this doesn’t happen for many parents. Here are some tips for investing in your child’s college education:

Start Now – Regardless of how much time you have before they graduate high school you’ll want to start investing now. Even if you think it’s hopeless to start now, do it anyway. Even if you only manage to save up enough to cover one semester, or just the books for one semester, it will help lighten the load when it’s crunch time. Any money you don’t have to take out a loan for is money well invested.

Choose Investments You Understand – If you’re not familiar with the stock market and you don’t understand how it works then you shouldn’t stake your child’s future on it. Many people only consider stocks when they think of investments, but there’s plenty of other ways to set aside money for this purpose. You could buy gold and use that as the investment vehicle of choice. You could buy a website, and put the money that it generates each month into an interest bearing money market account. If you aren’t comfortable with any type of investment that involves any risk, just make sure you put it into a guaranteed account like a CD so that you can fight against inflation. You don’t want the money you set aside to be worth less when your child is ready for college.

Invest a Little Every Month – Even if you only have a few years to invest, if you set aside a little each month this will add up over time. You might be tempted to compensate for the lack of time with bigger amounts invested monthly, but this will no doubt backfire and you then you’ll find yourself dipping into your investments to pay for monthly bills. No matter when you start, make sure you only invest money that you can afford to invest. It doesn’t make sense to pay transaction fees to invest your money if you turn right around and take it back out. Which leads to the next tip:

Don’t Touch It – You may start viewing your child’s education fund as a backup savings account. The temptation to use the money to pay for emergencies will be great. You have to put your child first and force yourself to forget about the money until freshmen year of college.

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