1-2-1: Create a College Fund for Your Kids and Habit Stacking
Happy One 2 One Day!
Here is 1 tip, 2 quotes, and 1 habit to consider this month.
1 Tip: Create a College Fund for Your Kids
Due to the rising costs of higher education, it’s more important than ever to plan ahead. Starting a college fund paves the way to get through college without the burden of heavy debt. Consider:
- 529 Plans: Contributions to this plan are not tax-deductible and are limited to $16,000 per donor. It grows tax-free.
- Coverdell Education Savings Account (ESA): Contribute up to $2,000 (after tax) per year, per child. It grows tax-free.
- Uniform Transfer/Gift to Minors Act (UTMA or UGMA): Funds can be tied to investments and mutual funds. Does not grow tax-free.
- Roth IRA: Contribute up to $6,000 annually ($7,000 for those age 50 and over), and access your contributions any time, without penalties. You must meet the qualifications to withdrawal the growth tax-free.
Tuition and living costs can run over $60,000 for a year at a private college and more than $30,000 per year at a state university. Generally, you want to save up to one-third of your projected future costs.
2 Quotes From Others
“Education costs money, but then so does ignorance.” – Claus Moser
“It is a most wonderful comfort to sit alone beneath a lamp, book spread before you, and commune with someone from the past whom you have never met.” – Yoshida Kenko, way back in 1330
We’re all creatures of habit to some degree. If you are having trouble making your financial habits stick, try habit stacking. According to James Clear, author of Atomic Habits, this is the practice of attaching two habits together.
Build a new financial habit by associating it with a successful habit that you are likely to keep. For example, check on your finances after your Saturday coffee. Bundle these habits together to keep focused on achieving the financial goal. Two habits are better than one. Give it a try!