Save money for your child's college education as soon as possible

Stephanie Kinkaid Assistant Director of the Wackerle Career and Leadership Center Monmouth College
Save money for your child's college education as soon as possible

Are you expecting a baby, or have you recently met your new addition to the family? What a joy children bring to your life! Although your baby is small now, you have probably heard that you should start thinking about college savings. It’s hard to think about just now, but you heard correctly. It’s time to start saving for the climbing costs of college tuition, and room and board.

Planning, budgeting and saving early has its benefits and can save you a lot of money in the long run! Your child, today, will likely face college tuition costs of 3-4 times what a college student currently pays. Are you ready? Let’s look at some ways to be prepared for your child’s college costs.


Do

Do save early, often, and regularly

Saving should start as soon as you know you are expecting. The earlier you start, the more you can save. Additionally, you have more time for your savings to earn interest. If you start saving early, make it a habit. If you put aside money out of every paycheck, it becomes a habit.

Do invest in a 529 college savings plan

A 529 is a great option for those looking for investment options. Not only is the investment tax-deferred, the dividends come out tax-free on a federal level. Shop around for the best deal with the lowest fees. If you can find a broker or advisor offering a 7% rate, you could accumulate around $20,000 by putting away $50 per month from your child’s birth. By putting away $200 per month, you could save almost $80,000.

Do invest your windfalls or inheritances

If you do happen to come into a sum of money, don’t use is frivolously. Put some or all of it in your child’s savings to help accumulate more interest. Remember, it’s less expensive to save than it is to loan later on.

Do increase the amount you save every year

Once saving becomes a habit, increase the amount you put aside yearly. Every time you receive a raise, use the extra money to earn interest in your savings. If you have the amount automatically deducted from your paycheck, you will never even notice it gone.

Do save cash gifts

If relatives gift your young child with cash, make sure to save it. There is no better gift you can give your child than an education, so consider saving all of the cash instead of spending it on clothing and toys your child does not need.


Don't

Do not underestimate the price of college tuition

Students who will graduate in the year 2031 can figure on paying $220,000 for in state college tuition, while those planning on attending a private institution can expect tuition to be $490,000. Those figures seem overwhelming, but being realistic about the costs can help you prioritize and save.

Do not forget to use saving money as a teachable moment

From an early age, you can encourage your child to put some of her/his allowance, gifts, and earnings into savings. If a child learns early on that saving part of every paycheck is expected, you will have taught him/her a very valuable lesson. When your child is old enough, show her how much interest she has earned on her savings. It will reinforce the positive lesson that saving can feel just as good as spending.

Do not ignore financial aid options

Parents should plan to save at least ⅓ to ½ of tuition costs before a child enters college. The rest of the amount can be obtained through financial aid and loans. Don’t stop saving once your child starts college. Keep putting money in your savings until your child graduates. Often, the higher a student’s high school GPA and SAT/ACT scores, the more likely he/she is to receive scholarships. If you experience a financial hardship, there are additional funds and grants that may be available.

Do not spend extra money once a debt is paid

If you are paying off a debt, such as a car loan, mortgage or credit card, put the same amount in savings once the debt is paid. You were already used to not using that money for household reasons, so keep saving!

Do not ignore a private college because you think you can’t afford it

Many times, small, private colleges may have more financial aid or scholarships available. This means that you might just be able to enroll your student for a similar amount that you would at a state institution. Take a look. It pays to look at all options.


Summary
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Saving for your child’s college is daunting. With preparation and discipline, you can save money so that your child has options in selecting a school. With education being so important in today’s economy, it is money well spent! Save early, often and regularly, and encourage your child to save as well. Your child will thank you for it.


More expert advice about Financing Education

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Stephanie KinkaidAssistant Director of the Wackerle Career and Leadership Center

Stephanie graduated from Illinois State University and has been employed with Monmouth College since 2007. She has a background as a mental health professional and has worked with thousands of college students as they prepare for the future. Her...

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