How to Avoid Common Mistakes When Saving for Your Child’s Education
Saving for your child’s education is one of the most important financial goals you can set. However, even well-meaning parents can make costly mistakes that impact their savings. Whether it’s not starting early, choosing the wrong savings vehicle, or underestimating the cost of college, avoiding these pitfalls can make a significant difference.
This guide will help you navigate common mistakes while offering practical advice to ensure you’re on track. A fiduciary financial advisor can play a crucial role in guiding you through this journey with a strategy tailored to your needs.
Mistake #1: Delaying Savings
One of the most common errors is waiting too long to start saving. The longer you delay, the less time your money has to grow through compounding.
How to Avoid This Mistake:
Start saving as soon as possible, even if it’s a small amount. Over time, consistent contributions can grow significantly. For example, a 529 plan offers tax-free growth on earnings, making it an excellent long-term savings vehicle.
Mistake #2: Not Understanding Your Options
Many parents are unaware of the variety of tax-advantaged savings accounts available, such as 529 plans and Education Savings Accounts (ESAs).
How to Avoid This Mistake:
Research your options or consult with a fiduciary financial advisor to understand which savings plan best aligns with your financial goals. For example:
- 529 Plans: Offer tax-free growth and flexibility for qualified education expenses.
- ESAs: Provide tax-free growth and can be used for K-12 and college expenses but have lower contribution limits.
Mistake #3: Underestimating the Cost of College
The cost of college is rising rapidly, and failing to account for inflation can leave you short of funds when it’s time to pay tuition.
How to Avoid This Mistake:
Use college cost calculators to estimate future expenses, factoring in inflation. A financial advisor can help you determine how much to save annually to meet your target.
Mistake #4: Ignoring Tax Benefits
Some parents miss out on significant tax advantages by not utilizing tax-advantaged savings accounts.
How to Avoid This Mistake:
Maximize contributions to accounts like 529 plans to benefit from tax-free earnings and potential state tax deductions. Work with a financial advisor to ensure you’re leveraging these benefits.
Mistake #5: Overlooking Non-Tuition Expenses
Education savings aren’t just for tuition. Families often forget to budget for additional costs like room and board, books, and transportation.
How to Avoid This Mistake:
Plan for the full scope of college expenses. Many 529 plans allow withdrawals for a wide range of qualified education expenses, making them a flexible choice.
Mistake #6: Sacrificing Retirement Savings
It’s common for parents to prioritize their child’s education over their retirement savings, but this can lead to financial instability later in life.
How to Avoid This Mistake:
Balance your savings goals by contributing to both retirement and education accounts. A financial advisor can help you allocate your resources efficiently. Remember, your child can take out loans for college, but you can’t borrow for retirement.
Mistake #7: Not Seeking Professional Guidance
Many families attempt to navigate education savings on their own, leading to missed opportunities or costly errors.
How to Avoid This Mistake:
Consult with a fiduciary financial advisor. They can help you create a customized education savings plan, maximize tax benefits, and avoid pitfalls.
Take Action Today
Avoiding these common mistakes can make a significant impact on your child’s future—and your financial health. Start early, explore your options, and create a plan that works for your family.
Call to Action:
Don’t let mistakes derail your education savings plan. Schedule a consultation with a fiduciary financial advisor today to build a tax-efficient, tailored strategy that secures your child’s educational future and protects your financial goals.
Global View Capital Management (GVCM) is an affiliate of Global View Capital Advisors (GVCA). GVCM is a SEC Registered Investment Advisory firm headquartered at N14W23833 Stone Ridge Drive, Suite 350, Waukesha, WI 53188-1126. 262.650.1030. Ryan Peca is an Investment Adviser Representative (“Adviser”) with GVCM. Additional information can be found at www.adviserinfo.sec.gov Global View Capital Insurance Services (GVCI) is an affiliate of Global View Capital Advisors (GVCA). GVCI services offered through Experior Financial Group, ASH Brokerage, and/or PKS Financial. GVCI is headquartered at N14W23833 Stone Ridge Drive, Suite 350, Waukesha, WI 53188-1126. 262-650-1030. Ryan Peca is an Insurance Agent of GVCI.
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