Just about every parent wants to send their child to college, but higher education is incredibly expensive. In fact, the average cost for one year of school is over $26,000 — up 34% from a decade ago. Luckily, there are many programs provided by local credit unions and state governments that can help you save for your child's education and avoid taking out a line of credit. Here are three of the top options available. 

How to Save for Your Child's College Education

1. Traditional Savings Account

Savings accounts allow you to steadily grow your money with a guaranteed interest rate. Additionally, the risk of utilizing such a service is low as long as you choose an insured credit union. Since the annual percentage yield (APY) of savings accounts are usually lower than riskier investment options, parents typically create a portfolio consisting of multiple account styles to obtain both security and potential growth. 

2. IRA

An individual retirement account (IRA) is a type of investment account with long-term savings in mind. Even though earnings aren't guaranteed as they are with a traditional savings account, the potential growth is typically higher. Such accounts also allow you to withdraw money completely tax-free for an approved expense. 

While traditional IRAs are designed solely for retirement, a Roth IRA can also be utilized for buying your first home and higher education expenses. Alternatively, a Coverdell IRA caters to college expenses specifically, including tuition, books, and fees. There are contribution limitations for both styles, and credit unions require minimum balance requirements to avoid fees. 

3. 529 Plan

Just about every state offers their own state-sponsored 529 plan, which allows you to invest post-taxed income in stocks and bonds. With Hawaii's HI529 program, the minimum initial investment is only $15, and each account is allowed to grow to $305,000 before contributions are capped, which may help your family avoid taking out student loans down the road. Unfortunately, the program doesn't qualify for any state tax deductions, and you'll face minimum yearly fees. However, parents have the option to invest in any state's 529 plan regardless of where they live or the child plans to attend school. 

With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial FCU is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad array of services, follow us on Facebook, Twitter, and Instagram for news and updates, or call (808) 832-3700 on Oahu or toll-free at (800) 272-5255 with any questions.