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Jan 11, 2019 at 12:00am ET By Joanna Hughes

Many parents find themselves in a difficult quandary when contemplating their kids’ higher education: how can they provide financial support without going into overwhelming debt while doing so? There’s good news, however. Not only are there things parents can do to come out ahead, but the sooner you know these things, the sooner you can start.

Read on for a roundup of six tips aimed at helping parents fund their child’s studies. 

1. Start early.

Compound interest is any saver’s best friend. The sooner you start putting money away, the faster it will grow.

The Balance advises, “Take a look at your budget to determine how much you could devote to college savings. Even if it's just $50 per month, that's a start and as your income grows or expenses decrease, you could boost your savings rate. And if you can't afford to save anything just yet, reach out to the grandparents to see if they might be interested in giving your child's college education fund a jump start.”

Think you can’t invest enough to make a difference? Think again. Small regular payments add up while still granting you access to the benefits of compound interest. Plus, you will notice them less than you would by investing a larger lump sum annually.

2. Be a savvy investor.

All investment plans aren’t created equal. “The only thing worse than not saving at all is putting your money in a passbook savings or money market account. In terms of investment vehicles, stock funds historically have almost always exceeded other investments over periods of ten years or more. Look for no-load (no fee to purchase or sell) mutual funds or exchange-traded funds for diversification with fewer costs,” continues The Balance.

It’s also important to routinely review how your funds are performing so you can make adjustments, if necessary. Working with a financial planner can help you not only home in on the best options for college savings, but can also take on the role of monitoring and managing your investments.

3. Consider a college savings plan.

The majority of US states offer 529 college savings plans, known as Qualified Tuition Programs (QTP). These are designed with specific benefits for parents, including the ability to withdraw funds -- as well as investment gains -- tax-free for use toward college and college-related expenses, such as books.

Other tax-advantaged accounts which can be used as vehicles for college savings include Roth IRAs, Coverdell Education Savings Accounts, and UGMA and UTMA Custodial Accounts.

Again, a financial planner can guide you toward the best college savings plan(s) for your situation.

4. Look into life insurance.

Some parents (and grandparents) choose to tap into the excess cash value of their life insurance policies to pay their kids’ college tabs. But this approach isn’t right for everyone.

The Globe and Mail says, “The benefit of this strategy is that the growth would be tax-deferred inside the policy, it says, while it is building while the downside is that the parents or grandparents will lose control over the money put into the policy and the coverage offered by the contract.”

Money Smarts blog author Mike Holman, meanwhile, is not a fan of this approach because of the high fees and commissions that go along with it. “That’s a really expensive way to save for anything,” he says.  

5. Prepay tuition.

Have a particular college in mind? If so, a state-run prepaid tuition plan may be an option.

SImpleTuition.com explains, “A number of colleges and universities participate in prepaid tuition programs for future students. This is quite an advantage to parents who can invest money now and lock in the tuition rate for their children well in advance of when the children will be ready to attend. Some prepaid tuition plans are managed at the state level, so you need to explore the options available to determine which is best for you. There is also the possibility that this financial move could provide a tax benefit to you, so you may want to ask a tax adviser for more information. Check with the college directly for more information.”

And while not all states offer this option, if you live in one that does, you can significantly trim your college costs.

6. Try to lower the costs.

Perhaps the simplest way to be able to contribute a larger share of your child’s higher education? Lowering the costs in the first place. In addition to choosing a less expensive college and/or getting scholarships, there are several other things you can do. University Student Money Management director Shakeela Hunter told US News & World Report, "See if your student’s high school offers dual credit and/or [advanced placement] courses, which count as college credit hours. Choose a community college that offers tuition at a lower cost that your child can attend, and then transfer those credits to the university of their choice."

Other strategies include helping your child select a particular area of study early to accelerate the path to graduation and to encourage your kids to work so that they can pitch in. From babysitting gigs for tweens to summer jobs for teens, there are plenty of ways students can contribute to the cause while also learning invaluable lessons about money management.

One last thing to keep in mind? Even with the best intentions and planning, you may not be able to fund as much of your child’s college costs as you would have hoped to. Helping them apply for scholarships, educating them about student loans, and teaching them money management skills are all great ways to support them in the pursuit of their college goals.

Learn more about earning your bachelor's degree.

Joanna worked in higher education administration for many years at a leading research institution before becoming a full-time freelance writer. She lives in the beautiful White Mountains region of New Hampshire with her family.

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