Today’s college degree is yesterday’s high school diploma. Every parent dreams of sending their kids off to college someday. However, college can be expensive, and it may be cost-prohibitive for your kids if you are unable to contribute a healthy sum of money toward their education. College savings requires an effective plan as well as regular effort through periodic contributions. Whether you are just getting started with your college savings effort or you are wondering if you are doing enough in this area, you can easily follow these steps to create an ideal plan or to improve your existing plan.
Adjust Your Budget to Prioritize Saving
Regardless of your income level, you may not be certain how you will find room in your budget to save for college. Many people live a lifestyle that uses up most or all of their available income, leaving little room for savings. It may be necessary to adjust your budget and scale back your lifestyle so that you can allocate a healthy sum of money toward college savings each month. Consider reducing your cable or cell phone plans, buying more affordable insurance and taking other steps to find money now that can be used for college savings. In addition, when you get raises, bonuses and more, consider allocating these toward college savings. Over time, you may be able to save a considerable amount of money to help your kids pay for their college.
Plan for Your Future First
While saving for your kids’ college is important, retirement saving is more important. Many adults are woefully unprepared for retirement. It can seem selfish for parents to prioritize their own well-being over the education of their kids. However, consider that children have various methods available for paying for college, such as grants, scholarships, loans and even their own contributions from a part-time job. You, on the other hand, will have no financial support available to help you when you retire. Social Security income is generally not adequate to fully support a lifestyle, and you need an extra source of income. Therefore, determine how much money you need to save regularly toward retirement, and reach that goal before you devote any money toward college savings.
Use a Future Value Calculator
If you have extra money available to save for the kids’ college, you then need to determine how much money you need to realistically save. You can use the Internet to estimate the average cost of a college education in the year your children intend to enroll. Then, you can use a future investment value calculator to estimate the amount you may need to contribute monthly to reach this goal. You may also need to estimate a reasonable return on your investment through careful research in order to fully complete this step.
Consider How You Will Invest the Money
There are many ways to invest your college savings money, and some offer a far more substantial return than others. Using a savings account or CDs is common, but this option provides only a modest return. College savings plans are also available, and you may enjoy a great return on these in some cases. These may be tax advantageous plans, and this can help you to find even greater amounts of money to save toward college. However, you may enjoy an even greater return when you use other investment options, such as stocks, mutual funds or a money market account. A money market account may provide a lower return than stocks, but stocks and mutual funds can be risky. Some will take a varied or diversified approach to maximum their return while moderating their overall risk.
Make Savings a Regular Habit
If you are not accustomed to saving, it can be a shock to your budget to suddenly start taking money out of your account each month. You may be accustomed to using these funds for other purposes. By adjusting your spending in other areas, however, you may free up money that can be used for savings without having to adjust your lifestyle. It is wise to automate transfers to your savings account, college savings fund or investment account on a regular basis. This way, you will see your account balances slowly increase over time, but you will not have to remember to physically transfer the funds yourself. It may also be wise to make weekly or biweekly transfers of smaller sums rather than to make a large lump sum amount each month.
Research Ways to Earn College Credit in High School
In many school districts, high school students are able to earn college credit in various ways. For example, they may take AP classes, enroll in a dual credit program or take CLEP exams for credit. Explore the options in your area. You may find that these are far more affordable ways to earn college credit than enrolling in a traditional college or university. In some cases, students are able to graduate high school with 30 or more college hours completed. This can dramatically reduce the overall cost of a college education.
Encourage Your Kids to Save for College
In an ideal world, you would be able to pay for all of your kids’ college education expenses, and some parents are able to accomplish this goal. However, many parents unfortunately are not able to amass such a substantial amount of money while also providing for their families on a regular basis and saving for their own retirement. Any funds that you can contribute toward their college education will be beneficial, but in many cases, kids will also need to find a way to pay for at least a portion of their funds. When your kids are able to work in high school, encourage them to start saving for college. In addition, get them accustomed to working a part-time job while going to school. They will then be able to pay for a portion of their college on their own. Loans can be used to pay for their rest of their college education.
Saving for college should be a goal for every parent. While it can be challenging to do so on a tight budget, most will be able to find at least a modest amount of money to contribute to savings on a regular basis. By doing so, you can help your kids to pay for college and enjoy a better future.
