Being a single mother presents so many extra issues when it comes down to raising a child. There’s no extra person there to pick your child up from school, no one to help you discipline them, and there’s also no one there to split the cost of higher education. We all know higher education opens so many doors for employment, and we all want the very best for our children, but the cost is only rising.
Today, you can’t get a degree from a university without paying at least $40,000. Just one year at an in-state school will cost $10,000. For out of state schools, you’re looking at an average of $25,000. And for private universities? That’ll be around about $33,000, ma’am. And tuition increases by about 2% each year, so by the time your children are ready to attend school, you could be looking at paying double. If you don’t do any saving at all when they’re young, it’s going to be that much harder when you start looking at the high cost of student loans, government assistance, and financial aid.
You’re not without options, though. There are many ways a single mom can save for college that save money on taxes for tuition and are easy to use. Let’s look at some ways to start saving for your child’s college tuition.
How to Save for College as a Single Mother
529 Savings Plan
A 529 Plan is an education savings plan that can be used to meet the costs of qualified colleges and universities across the country. It is a savings plan that you pay for monthly from your bank account or directly from your paycheck that is exclusively for your child’s college. Not only are is it easy to use, but everyone is eligible for 529 savings plans. You’re not limited in school choice when your child is ready, abut the best part is that they’re federal, so you get a special tax benefit when using this particular savings plan.
529 Prepaid Tuition
This type of plan is an excellent choice if there’s a really good chance the child will be attending in-state college because it only applies to colleges in your state. Of course, there’s no way to guarantee this if the plan is started at birth, but even if your child doesn’t go to an in-state school, you get a good amount of the investment returned to you or converted for use at the other school pick. 529 Prepaid Tuition Plans do need a seed deposit, so they’re easiest to start if you get a little pop of money like an inheritance. If you’re pretty set on a college, you can also get them from the institution itself, as well as from the federal government. The best part? They lock in tuition prices when you start your prepaid plan.
Automatic Savings Account
If you aren’t 100% sure if your child will go to college or don’t want to take the risk of investing in a college they might not decide to attend, you can stick with an automatic savings account and save money for when your child will need it for something else. These accounts are great because you can set them up to be a monthly draft from your own checking or savings account or take it right from your paycheck, so you never even see the money. The other benefit of automatic savings accounts is the fact that the money can be used for anything. It can be used for a trade school, a trip to Europe, or even medical bills if necessary.
The Uniform Gift to Minor’s Act (UGMA) and the Uniform Transfer to Minor’s Act (UTMA) created custodial accounts, and they’re the oldest forms of college savings accounts. Custodial accounts hold assets for minors until they reach the age of majority in their state. These accounts are considered property, so unfortunately, a certain amount of the investment will be taxed at the child’s rate. The good news is that the rest will go untaxed. When your child is old enough to go to college, you’ll have to transfer the account to your child so that it’s her property at that point. Like an automatic savings account, the money can be used for college or something else.
Whichever route you choose, it’s important to start saving early for your child’s education. If you don’t have any money set aside when she turns 18, it can be impossible to afford college as a single mom. The smart decision would be to start saving as much as you can from her first day of school so there are no surprises once your child is ready to graduate high school.
Until next time,