If you have kids, then most likely you’ve already had a panic attack over the thought of paying for their college. Whether you have been saving since day one or you aren’t sure where to start, the art of efficiently saving money can be very confusing.
When should you start saving? How do you know how much college will cost in 18 years? Which savings plan is best? How should you invest? What happens if your child doesn’t go to college? Will your savings plan let you use that money for something else?
The most important thing you can do is not to get overwhelmed…I know, kind of impossible. Take a deep breath, and use some of these tips to help make saving just a little easier.
1. Start Saving Now!
The act of saving is daunting. It never seems like “enough”, and we often procrastinate because what we can afford doesn’t seem like it will truly have an impact.
What is $5 going to do?
That is one of the worst mistakes to make. Start saving now. Save what you can, when you can. You would be surprised how quickly loose change and singles will add up. Don’t be intimidated by what you should be saving. Something is better than nothing.
2. Calculate the Cost
Avoid sticker shock by being an informed buyer. There are many websites that offer tools on how to calculate what kind of college costs you’ll be looking at in the future.
Calculate the future cost of your children’s college experience and get a general idea of what you will need to save each month with a conservative savings plan.
This will give you a better idea of how and what you should be saving. It will also help you understand that your saving probably won’t cover 100% of the costs…but that is ok.
It is generally unrealistic to think that you will be able to cover every dime for college. Check out the College Savings Planner from ScholarShare.
3. Set Realistic Goals
If you start making monthly goals, you may find it easier to save money. With a monthly end point in mind, you can find ways to cut corners and put more money aside to hit your target. Make sure you are realistic with your goals as not to overwhelm yourself or other finances.
Once you are comfortable hitting that monthly amount, you can begin to consider raising the bar and slowly inching your way to the finish line. Remember, saving for college is a marathon. Slow and steady wins the race.
4. Open a 529 Account
As California’s state-sponsored savings plan for higher education, there are many benefits to opening a California 529 College Savings Plan.
- All qualified earnings are tax free.
- Funds can be used at schools across the Nation not just California.
- Funds can be used for a wide variety of school needs and supplies.
- In 2014, families with 529 plans withdrew over $300 Million to cover higher education costs.
- There is no annual maintenance fee and no income limits.
- The 529 Plan offers high maximum account balance.
- Any legal resident of at least 18 years can open an account. Anyone can gift to an existing account through the “Give a Gift” option.
It is easy to open the account with an initial contribution of only $25 (If your employer allows payroll deduction it can be as low as $15.)
5. Take Advantage of Payroll Deduction
If your employer offers payroll deduction, use this as a tool to contribute to your savings plan. There are no enrollment periods which means you can start and stop at any time or change your monthly contribution as needed.
With your contribution taken directly from your check, you might find that you don’t even miss that extra cash each pay period.
6. It Takes a Village
Ask friends and family to give donations to the 529 account. Instead of buying toys that are soon forgotten, have them contribute to the 529 on birthdays or holidays. Anyone over 18 can open or contribute to a 529 for your child’s college education.
7. Research Scholarships and Financial Aid
Even if your child is years away from college, start looking now at qualifications for financial aid and potential scholarships. You may think that you won’t qualify for financial aid or student loans, but it doesn’t hurt to look and you may find other cost saving ways to pay for college.
As for scholarships, there are countless offers to help pay for tuition, some that you might never have imagined existed. Time is your best friend here.
By looking into these options early on, you’ll be able to put your kids on the right track for the scholarships that meet their skill sets, and you may realize you won’t need to save quite as much money as you thought.
8. Understand Your Risk
If you have the means to invest aggressively, you may benefit from large returns but you also run the risk of greater loss as well.
Determine if you need to be conservative with your investments. ScholarShare actually has a method for managing this for you!
Go to local lectures on college savings plans, visit your bank and gather information about available plans, and talk to other parents. ScholarShare Speaks holds talks all over California in order to help spread important information about our children’s education and health.
Talk to other parents in different stages of college saving or parents with kids in college. Ask your own parents what they wish they had known before they wrote that first tuition check. Not only might you find helpful advice, but you’ll realize you are not alone in this struggle.
10. Get Involved
The most important thing you can do for your child is be there for them. Help with homework, inspire learning, and encourage new and challenging material. If you offer support during these impressionable years, they’ll be more likely to succeed.
It is crucial to stress the importance of education to your children, not just provide the means. Many children (and college students) do not comprehend the true importance of education or understand just how fortunate they are to have readily available access.
Do not let those years of hard work and savings be wasted. Teach your child that the value of an education cannot be defined by a dollar amount.
I am sharing this information as a ScholarShare Ambassador, however all opinions remain my own.