3 tips to start building a college savings account

A new survey by online brokerage TD Ameritrade says college is the top reasons teens save their money. The results were a pleasant surprise to educators who are focusing on getting personal finance taught in schools. The survey indicated 78 percent of teens say they want to share the cost of college with their parents.

To start building your college savings, here are a few tips:

1. Assess the Details. The first step is for parents and teens to analyze their current situation together, taking into account what they already have saved for college and how long it will be before the first year of school begins. Online calculators are available at: apps.finra.org/Calcs/1/CollegeSavings and planning.tdameritrade.com/sites/client/tda/tdap/calculator.vm?siteContent=5234&topic=5025

2. Select an Appropriate Account. After assessing your financial status and determining what you’ll need, the next step is to compare the benefits of different savings options. A 529 college savings plan, for example offers a prepaid tuition option, which locks in costs of tuition and mandatory fees or a savings plan, which doesn’t lock in tuition costs but also covers room and board, books and mandatory fees.

Other options include a Coverdell education savings account, which is similar to a Roth IRA in which taxes are paid up front but the savings grows tax-free and are taken out with no taxes due.

Custodial savings accounts are also available, which typically help families set aside money for additional expenses not covered in the other plans such as sorority dues or music lessons.

3. Monitor Your Financial Progress Together. Once a savings plan is established, monitor your progress along the way to ensure your strategy is helping you meet your financial goals. Keeping score along the way is an important responsibility that can be shared by both parents and teens. This includes checking the earnings statements to see how the investments are performing and make adjustments or consult with an adviser about maximizing gains.