Before you know it, your child will be going off to college. Start a college fund for a child to give him a gift that will shape his future. It's simple to do, and the fund can usually be started with a small sum of money. Education is a gift that lasts a lifetime, and it's never too early to get started at giving that gift to your child.
Instructions
1. Decide how much money you will use to open the fund. You can usually open up a college fund for a child with a very small sum. However, you can choose to invest much more from the beginning. Figure out an amount that's right for you and that you can afford.
2. Open a 529 savings plan. A 529 savings plan is an investment account that is perfectly suited to use as a college fund. You or virtually anyone related to your child can put money into the account. When investing into the account, the process is usually tax-free. Additionally, there are normally no taxes deducted when withdrawing money for the account, as long as the money goes toward higher education. The exact rules vary from state to state, so be sure to check the stipulations in your state.
3. Plan a schedule that outlines when and how much you will continue to invest in the account. With a 529 savings plan, you can slowly build up the balance in your account over time until it's necessary to withdraw the money. The best way to build up the balance is to contribute a set amount each month and consistently contribute that amount to the savings plan.
4. Inform other family members about the college fund. Family members can usually put money into the account tax-free. Encourage family members to invest money in leiu of birthday and holiday gifts.
5. Keep the money in the account until your child is ready for college. There are big penalties if the money is used for anything other than higher education. It's never a good idea to remove money from the account for any other purpose.
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