There were over 19 million students at U.S. universities and colleges in 2020 alone. That’s a lot of people! And more kids apply to attend each year.
If you have a child, you might be worried about how you’re going to pay for college when the time comes. Luckily, we can help.
Read on to find out your different options when you’re trying to save for college.
- Start Early
The earlier you start putting money for college away, the better. Even small amounts put away can add up over time. Starting as early as possible means you have more time to save money for your child’s education.
This can make it easier to reach your savings goals without having to make larger contributions later on.
When you start saving early, your contributions have more time to earn compound interest. This means that the interest earned on your contributions is reinvested and earns more interest over time, allowing your savings to grow faster.
Starting early gives you more flexibility to adjust your savings plan as your child’s needs change. For example, if your child decides to attend a more expensive college than you had originally planned for, you will have more time to adjust your savings plan to accommodate the increased costs.
Saving for college can be stressful, but starting early can help alleviate some of that stress. When you start saving early, you can be more confident that you will have enough money to cover your child’s education expenses, which can give you peace of mind.
Starting early gives you more options when it comes to choosing savings plans and investment options. You can take advantage of tax-advantaged savings plans and choose investments with a longer time horizon, which can lead to better returns over time.
- Set a Goal
Determine how much you want to save for your child’s education and create a savings plan to achieve that goal.
The first step is to estimate the total cost of your child’s college education. You can use college cost calculators available online to get an idea of the costs of tuition, room and board, books, and other expenses.
Depending on what schools your child is aiming for, you might be looking at wildly different sums of money. For example, look at Notre Dame cost to see what you would expect for that skill.
You will need to determine how much of the total cost you will be able to cover through savings, scholarships, grants, and other sources of funding.
Once you know the total cost and your expected funding sources, you can calculate the amount you need to save to cover the remaining balance. Divide the total amount you need to save by the number of years until your child starts college to determine how much you need to save each year.
If the amount you need to save each year is unrealistic, you may need to adjust your goal by considering other funding sources or plan to cover only part of the total cost.
- Consider a 529 Plan
A 529 plan is a tax savings plan specifically designed for college expenses. Contributions to these plans grow tax-free, and withdrawals from the accounts are tax-free as long as they are used for qualified educational expenses.
Look into other savings options. There are other savings options available, such as custodial accounts, Coverdell education savings accounts, and UGMA/UTMA accounts.
Setting up automatic contributions to your child’s college savings account can help you keep on track with your savings goals.
- Cut Unnecessary Expenses
Cutting back on unnecessary costs can free up more money to put towards college savings.
Eating out can cost a lot of money, especially when you do it regularly, so try to cook at home as much as possible. You can also save extra money by bringing your lunch to work or school instead of buying it.
Entertainment can be a big expense, but there are ways to cut back. For example, you can rent movies instead of going to the theater or have a game night with friends instead of going out.
Look for deals like coupons or discounts when shopping for groceries and other items. Use coupons and buy items on sale to save money.
If possible, use public transit instead of a car. This can help with gas, insurance, and maintenance costs.
If you’re renting, consider moving to a cheaper apartment or living with roommates to save money on rent.
Take a close look at your monthly subscriptions and cancel any that you don’t need or use. This can include the gym, streaming channels, and magazine subscriptions.
- Encourage Your Child to Contribute
Encourage your child to contribute to their own college education savings. Talk to your child about the importance of saving for college and the benefits of contributing to their own education.
Make it clear that you are willing to support them but that you also want them to take an active role in their own financial future.
Work with your child to set a savings goal that is realistic and achievable. This could be a certain amount per month, per year, or a total amount that they want to save by the time they graduate high school.
Consider matching your child’s contributions to their college savings account. This can be a powerful incentive for them to save more and take ownership of their education.
Help your child find ways to earn money, whether it’s through a part-time job, babysitting, or other opportunities. This can give them a sense of pride and accomplishment in contributing to their own education.
Save For College: Start ASAP
Remember, every little bit helps when it comes to trying to save for college. By starting early, setting a goal, and exploring your options, you can create a solid plan for funding your child’s education.
Are you searching for more financial guidance? Some of the other posts on this website might be beneficial to you.
