Congratulations on becoming a new parent. Whether this is your first rodeo or not, saving money for your child is likely on the forefront of your mind.
The sticker price for a college education continues to soar. In fact, certain states have seen as much as a 77 percent increase in tuition and college costs between 2009 and 2014, NPR reported.
The increasing cost of higher education is leaving many parents scrambling to begin savings accounts for their children. After welcoming your baby into the world, take the time to consider the best way to start saving for his or her future.
Invest in a 529 college plan
One of the most popular methods for saving for college is starting a 529 plan, according Bankrate. This operates like an individual retirement account or 401(k) plan. It is a tax-free option that allows you as a parent to stash away and invest money for your child.
"The gains on the accounts are tax-deferred, and once the funds are used to pay for qualified tuition expenses, parents will never pay taxes on those funds," said Craig Parkin, director of institutional client services for TIAA-CREF Tuition Financing, according to Bankrate.
Also, if your child does not want to attend college in the future, the owner of the account can change who the beneficiary is to ensure the funds are used for educational purposes.
Consider prepaying tuition
In some regions, you can lock in a current tuition rate and pay for you child's undergraduate career before the price goes up, according to U.S. News & World Report.
In addition, the money is also guaranteed by the states in which you buy. Also, prepaid tuition plans offer parents tax incentives, according to Bankrate.
Prepaid tuition is a more secure option than a 529 plan because it does not depend so heavily on the condition of the market. After the financial crisis, many parents helplessly watched 529 plans dive in conjunction with the stock market. Prepaid tuition provides security because it is not impacted by the market or the rising cost of education.
"(Prepaid plans) take market volatility out of the equation," said Nancy Farmer, president and CEO of the Private College 529. "You don't have to watch the market. It's done. College is paid for."
Preparing for your child's future starts with a little research and figuring out the best option for you and your new family.