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Tips on Saving Money for College
Tips on Saving Money for College
It's no secret that the cost of a college education is rising each year. More parents and students are struggling to come up with the funds necessary to pay for higher education by turning to loans and scholarships for help. While these financial aid options are great, it's a good idea to start saving for college in advance so you don't have to worry about accumulating debt or not being able to get enough aid. Here are a few tips to help you put aside cash for college, according to FinAid.
When to start It's helpful to start saving for your child's education early. The longer you put aside funds, the more money you'll have available when the time comes to see your kid off to school. Consider starting a college fund as soon as your child is born, or earlier if possible. This will help you get into the habit of saving, and you'll be gaining interest on your account instead of paying interest later on a loan. Even if you have to wait a while to begin saving, any amount will help in the long run.
When to save While putting aside funds at random intervals is still effective, it may be better to save a certain amount each month. This will ensure that the amount is steadily growing and that you won't forget to add money. Try setting up a separate savings account specifically for the purpose of education, then have your bank take the money directly out of your regular account each month and add it to the fund. If any of your other monthly payments end, like your gym membership or day care costs, adding those into the fund should be easy and painless.
How much to save How much money you save depends on how much you make, but even if you're starting out with small amounts, the numbers will increase over time. FinAid points out that saving just $50 a month starting when your child is born would lead to $20,000 by the time she's a high school senior (with a 7 percent return on investment). Saving $200 every month would lead to about $80,000! It's up to you how much you want to save.
Staying consistent As the years progress, you may want to consider saving about 5 percent more each year to keep up with tuition inflation rates. Establish a specific savings goal you want to reach, then plan it out accordingly. You might even ask your relatives to contribute to the fund annually on your child's birthday. If you experience any monetary gains, like through the lottery or an inheritance, don't forget to add some into the fund.
Involving your children Since teaching your kids about financial responsibility is important to ensure their future successes, you may want to use their college savings funds to do it. Keep them informed about what's going on with the savings plan and encourage them to contribute whenever possible. You could even give your teenagers incentive to put money aside by setting up an agreement in which you'll match whatever amount they manage to save.
Even if your child is lucky enough to get a free-ride to college, the extra savings will definitely come in handy. You could transfer the funds into a retirement account for your child or use the money to pay for books, living expenses and other essentials throughout her college career.