Setting up a college fund in your child's name is one of the best ways to invest in her future. According to FastWeb.com, while college graduates can generally expect to earn more and experience greater job stability than those with only a high school diploma, going into debt to pay college expenses can significantly affect the financial advantage. Setting up a college savings plan when your child is young can reduce or eliminate the need to borrow funds that result in an average payback term of 11 years.
Step 1
Talk to an investment representative at your bank or your financial adviser to get information on college savings plans you can set up in your child's name. Three common types include a custodial savings account that lists both you and your child as account owners, a 529 savings plan or a Coverdell Education account that lists you as the account owner and your child as the beneficiary.
Step 2
Research and compare advantages and disadvantages of each type of college savings plan by creating a comparison checklist, identifying items such as contribution limits, tax advantages, distribution requirements and account maintenance fees, if any.
Step 3
Select the college savings plan best suited to your needs and gather information you will need to open the account. In most cases, this information will include personal information for you and your child, Social Security numbers for tax purposes and bank account information if you will be making direct deposits to the savings plan.
Step 4
Make an appointment with your banker or financial adviser to fill out paperwork required to open the savings plan.
Tips and Warnings
- If your child is old enough, include him as you go through the process of choosing and opening a college savings plan. Although a custodial savings account provides fewer tax advantages as compared to other college savings plans, this is the only plan in which you can list your child as a co-owner. In addition, a custodial savings plan allows your child to contribute directly to the account.
Things You'll Need
- Savings plan comparison checklist
- Personal information
- Social Security number
- Bank account information
- Initial deposit
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