Great Tips to Save For College
With college tuition and related costs one of the fastest rising expenses, it’s more important than ever to have a sound plan for your child’s college fund. The basics of a college fund are simple; you start early and you contribute regularly. Unfortunately it’s a little more complicated than that if you want to ensure you can meet the costs of college 18 years from now. The fund should start the day the child is born and should be added to every day thereafter.
• Open a separate account and designate it as the college fund. This account should be off limits in all but the most dire emergencies. Never borrow from this account for anything that isn’t absolutely necessary, lest it become a habit.
• Instead of a regular savings account, look into money market accounts and certificates of deposit, which offer higher interest rates and are less accessible to you for casual borrowing.
• Setting up automatic payments is a good way to ensure you make regular contributions. After a while, you won’t even miss these monthly allotments. If if the monthly payments are minimal, the fund will slowly increase and interest will acrue.
• When a parent tries to estimate the amount of money that will be necessary to pay for their child’s college, they often panic when they come up with the number. The entire cost of the education will not come from the fund. Loans, grants, income and scholarships will all help pay the bill.
• Regardless of how much you are able to save, save something. Even if you only contribute $10 a month at the beginning, the fund will grow and you can always increase the savings rate later. Make it a habit.
• Any money that comes your way that you weren’t expecting is a perfect contribution to the fund. Many parents add tax refund checks to the account. Over the years these contributions can accrue to a large amount.
• As one expense goes away, such as a car payment, braces, etc., redirect the money into the college fund. You won’t miss it since you didn’t have it before.
• The government offers what is called a 529 college Saving Plan to help parents save for their kid’s college. Any interest earned on the account is tax deferred and withdrawals from the account are tax free if they are used for a qualified education expense.
• Many companies offer rebate programs designed to save for college. Many credit cards offer these programs as a type of cash back program.
• Eighteen years is a long time so use it to your advantage. Be consistent is contributing to the fund and don’t slack off. Stay dedicated to the goal and when the time comes, the money will be there waiting.
College is expensive and will continue to get more expensive as the years go by. Do for your child what he or she cannot do for themselves and begin to save. Some day they will thank you for it.