College is probably one of the biggest financial concerns that parents face. For others, it might seem premature to think of saving for their kid’s college education while he is still wearing a bib. However, it’s more important than ever for parents to start doing so as early as possible.
As years go by, college fees continue to rise. And since inflation keeps up, there are no signs that they are going to decrease anytime soon.
Some parents do not run out of excuses when it comes to kicking off their savings plan for their child’s higher education. Some say they don’t have money to save. They often reason out the never ending bills to pay like mortgage, home repairs, and car maintenance. Others attribute it to their lack of knowledge where to invest their money. Some assume that their children will get scholarships to fund their education. While other parents think their children will not be eligible for financial aid if they save up for it (which is, by the way, not true). But if you think about it, you will, nonetheless, have to pay some of the costs of your child’s education.
That said, planning way ahead of time will be your greatest ally toward alleviating impending financial pressures. After all, it’s never too early to start putting money aside especially when it comes to your kid’s future.
By starting a savings plan early on, you can reduce, if not totally get rid of, the burden of taking on high debt to pay for your child’s higher education.
Here are some ways to build savings for your children’s higher education:
Start getting into the habit of saving
While it may seem to be extremely difficult to set money aside when you have several other bills on the table (particularly costs screaming ‘urgent!’), you might be surprised to see how easy it is to stash away some of your money for your kid’s college once you start looking closely at your spending habits.
You might not have realized that there are expenses which you can cut back. Be resourceful as well in coming up with ways to meet your needs to have more money allotted for your child’s education.
Say, for instance, you purchase Starbucks or Dunkin’ Donuts coffee every single day. You’d be surprised at how much money goes into your coffee. The more you’ll realize what a difference it would make if you opt to prepare your own coffee at home for the sake of your child’s future.
See how much money you would save over the course of the year through the money accumulated that could have been spent on your latte, and with your kid’s future in mind, you’ll see it is worth the compromise. Remember, time is your ally. Your $50 stocked away money monthly can make a big difference 18 years from now. That’s the magic of compound interest.
You might be overwhelmed, but keep in mind to start small. Once you’ve built the habit, you can increase it a notch higher and continue to do so as time goes by.
Lastly, make sure that you have an account specific for that locked up for 18 years and contribute to it consistently. The worst way to go about saving money for your kid’s college education is by just hanging onto the money.
Putting the money in a savings account with a low-interest return is a not so good choice. Worse, sticking their college money in your sock drawer is like throwing away the interest that can be gained. Remember the reality of inflation, my dear.
Seek advice from a professional – and only from a professional
Get professional advice early on when it comes to your finances. Just as a plan in any other aspect of life is indispensable, so is a financial plan.
It will help you put aside money in gradual, less noticeable increments, while still allowing you to take other long-term priorities into account.
Leverage the right savings vehicles
There are investment accounts that allow you to set aside money for your child’s education and let it grow tax-free. 529 college savings plan, for example, is created by the government and was designed specifically to encourage saving for college.
As long as it’s for higher education, the government won’t tax your withdrawal. There are, of course, stipulations, contribution limits, and age ranges on each plan, and even on a variety of investments you can pursue, so you should turn to a pro for assistance and advice (see #2).
You may also want to check out whole life insurance. You’ll be availing life insurance protection, which is something indispensable for a parent, being the one who provides for the children, while at the same time building a cash-value asset that may one day be of use to fund your child’s college.
Have your children’s grandparents (and others) contribute
Since your parents and friends are fond of giving your children toys, why not ask them to use the money instead for your children’s future tuition? While it may be tacky to do that, it really is practical instead of tons of toys for his birthday or Christmas. Surely, they’d be glad to be of help.
Sell or Pawn Your Old Stuff
If worse comes to worst, you can consider selling or pawning your old stuff such as jewelry, gadgets, and other valuables. This is probably the easiest way to overcome your short-term cash needs.
Save money for your children’s education
Financially, it is an important time to lay the groundwork for the future of your child. Wouldn’t it be a huge relief to know that your child won’t have to pay a dime to go to school especially at times of financial crisis?
Start saving for your children’s education now that you still have plenty of time. The earlier you start, the better.