If you have children, saving for their college education might seem like the most impossible task of all time. How can you possibly save enough to pay thousands of dollars in tuition after they graduate high school? We may have found the answer, and it’s a lot easier than you think! Here are five great ways to save for your kid’s college fund.
1) Drop your overpriced insurance plan
One way to save for college is to drop your overpriced insurance plan. You’re probably paying too much for your car insurance, health insurance, and life insurance. By cutting out the middleman and shopping around, you can easily save hundreds of dollars a year. Plus, you can use that money to start a college fund for your kid. Put it in an account every month so that by the time they’re ready to go off to school, you’ll have enough saved up.
Don’t get us wrong—most insurance is a good idea. You just don’t need some of it, like life insurance and car insurance. Those are plans people buy to protect themselves from something bad happening, but why spend hundreds of dollars a year on insurance if you’re not even using it? Don’t listen to your agent who’s trying to sell you their product; shop around and see what’s available elsewhere. You may be able to drop your overpriced car insurance and pick up a less expensive one somewhere else. The same goes for any other kind of coverage you can live without. Once you start paying significantly less each month, take that money out every month and put it into a savings account dedicated solely to your kid’s college fund.
2) Prioritize retirement savings
Saving for your child’s college fund is important, but it shouldn’t come at the expense of your own retirement savings. After all, you’ll need money to live on when you retire. You can use a Roth IRA and take advantage of tax-free withdrawals later in life. Consider saving for both retirement and your kid’s college fund by setting up an automatic investment plan with an online broker.
Another way to save for your child’s college fund is by opening a 529 plan. These accounts, named after Section 529 of the Internal Revenue Code, are state-sponsored investment vehicles that offer tax breaks and other incentives. With a 529 plan, you can take advantage of federal tax deductions as well as credits in many states. A 529 account also offers peace of mind because if your child doesn’t go to college, you’ll have the option of withdrawing funds without paying any penalties or taxes (as long as they’re used for qualifying educational expenses). Also remember that if you have more than one child, there may be benefits available based on how much they contribute to their education. It might be worth asking about these benefits if your children are still young.
3) Look at the bigger picture when saving for college
It’s never too early to start saving for college. In fact, the sooner you start, the better. By taking a holistic approach to saving, you can ensure that you’ll be able to cover all of your bases. Start by opening an account with an online bank such as Capital One 360. They offer high-yield interest rates on savings accounts, and they have a robust mobile app and website. You can easily deposit money into your account and set up automatic transfers or recurring deposits from checking to help save for your kid’s college fund. You should also consider taking advantage of any tax credits you’re eligible for when filing taxes.
If you’re saving through your employer, you may also be able to take advantage of a Roth option—this is an account that allows you to contribute money with after-tax dollars, but then withdraw funds tax-free after you reach retirement age. The benefit of these accounts is that your savings will grow tax-free, so any earnings on your investments will be exempt from taxes until withdrawal. If you’d like more help setting up a plan or determining how much you’ll need in total, work with an online financial planner who can run simulations based on your specific situation and goals. You can find planners through organizations like Garrett Planning Network and Financial Planners Federation.
4) Consider student loans as an option
It can be difficult to save enough money for college, especially if you have more than one child. Student loans can be a great option to help cover the cost of tuition. Make sure to shop around for the best interest rate. There are several repayment plans available, so choose the one that best fits your needs. longer the loan, the lower the monthly payments will be. However, you will end up paying more in interest over time. If you have multiple loans, you may be able to consolidate them into one loan with a lower interest rate.
When applying for student loans, it’s also important to compare them with your financial aid options. You may be able to get more in grants and scholarships, so weigh both options before committing. Finally, many students are eligible for work-study programs that allow them to work their way through college during school terms while earning a little extra cash. Speak with your financial aid office if you think you might qualify. Try saving money on day-to-day expenses: Another smart idea is trying to save some money every month by cutting out your daily Starbucks run or eating out less often at restaurants. Every little bit adds up! This is especially useful if you’re trying to save up a lump sum of money.
5) Don’t choose your career based on money
It can be tempting to choose a high-paying job when you’re first starting out, but sacrificing your happiness for a bigger paycheck can lead to long-term regret. Instead, focus on finding a career that you’re passionate about and that will make you happy. Once you have a solid career path chosen, you can start thinking about how to save for your kid’s college fund. The earlier you start saving, the more time your money has to grow. Even if you only have a few dollars to put away each month, starting early can make a big difference down the road.
Think about what you love doing, and then explore careers that incorporate those things. For example, if you enjoy working with people and helping them feel better, look into careers in health care. If numbers are your thing, an accounting career might be a good fit. The point is not to choose a high-paying job just because it pays well—it should also align with your personality and interests. Once you have a career path in mind, start thinking about how to save for your kid’s college fund so that you can work toward reaching your goals sooner rather than later. You may not know everything there is to know about saving yet—that’s okay!