Saving for a child’s college education is one way to prime them for future success. Though the topic of education has long been mired in controversy, schooling is the bedrock of empowerment. From absurd tuition fees to unrelenting student debt, the cost and financial aftermath of pursuing a college career deter most from seeking higher education. Fortunately, with ample forethought and savvy saving tactics, you can effectively put away enough money for college. Here’s a general road map for saving for college.
Education Savings Account
Much like its name suggests, an ESA is an account dedicated to saving for education expenses. As the account holder, you’re allowed to put $2,000 in per year. If you get an early start, you can save $36,000 by the time your kid is 18. However, if you decide to invest, this figure can grow exponentially. If investing isn’t your strong suit, consider consulting a financial advisor. Best of all, this option isn’t taxed, allowing you to withdraw the money penalty-free.
Similar to an ESA, a 529 Plan is another tax-advantaged investment alternative. 529 Plans are viable options for those who don’t meet the necessary income requirements to open up an ESA. Unlike an Education Savings Account, a 529 Plan grants the account holder permission to switch beneficiaries. In other words, if the child you’ve opened up the account for decides against college, the funds can go to another kid. Many opt for this resource due to the higher contribution rates and flexible conditions. Regardless of your age of financial standings, you’ll likely qualify for a 529 Plan.
Scholarships are a godsend for budding college students. If your child’s earned good grades, partakes in a sport, or boasts any academic awards, use these accomplishments to secure a scholarship. While some scholarships are less rewarding than others, free money is free money. Applying for scholarships is simple, and you never know what your child will be eligible for. With that said, don’t be afraid to exhaust these resources.
Establish A Retirement Plan
Your efforts will be rendered useless if you don’t prepare for your future as well. Depleting your retirement fund will only wreak havoc on your children’s lives and, in turn, unravel the safety net you’ve put in place for them. Though it sounds selfish, you need to take care of yourself before taking care of your offspring. Otherwise, you’ll be ill-equipped to manage both a retirement and college fund. In the hopes of providing a cushy life for your children, you need to strike a balance between funding their college education and your retirement.
Evaluate Your Values
This step is individualistic and demands introspection. When it comes to saving for your kiddos’ college careers, you need to ask yourself how far you’re willing to go. Will they be expected to pay for some expenses? Are there exceptions you’ll bend for? Is this limited to a four-year degree? Each family will have their own answers to these burning questions, so it’s best to remain unfazed by the opinions of others. Consider your family values and honor them.
Private Vs. Public
Private colleges are notoriously more expensive than public options. If your child has their sights set on a private school, and you’re willing to shell out the money, extra measures are warranted. Fortunately, private schools offer more scholarship and grant opportunities due to their higher admission and tuition fees. Public schools offer these outlets as well but seldom cover room and board, books, and tuition the way private universities do. These considerations raise another pertinent question. Is public schooling a feasible option for your family?
As a parent, you want to shower your kids with the best the world has to offer. While this is a lofty ambition, it’s not always sensible. Poor decisions beget poor decisions, resulting in countless financial fiascos. If you’re someone who needs additional guidance when seeking saving options, consider employing a financial professional.
Establishing relations with authorities at your child’s desired college can go a long way. Not only does this bode well for their future, but it helps to get your foot in the door as well. More than anyone else, college administrators are aware of money-saving options. Seeking guidance from them may very well save you cash in the long run. After all, it’s not what you know, but who you know.
Urge your child to enroll in AP classes and college-level courses in high school. These classes are free and offer college credit. Earning college credit in high school means fewer expenses later on. Their academic counselor will steer them in the appropriate direction. Above all else, this will prepare them for what’s expected of them in college.
Know What to Expect
The most efficient way to save for college is to know what’s in store for you as the saver. Crunch the numbers beforehand; that way, you have an idea of where your money should lie in the future for your child’s college years. Many overlook this step for fear of the results, but in this instance, ignorance is anything but bliss. Unfortunately, there’s no way to calculate a precise number. You’ll want to recompute the figures every few years in hopes of getting an accurate calculation.
|Brittany Waddell is a contributing writer and media specialist for NextGen Wealth. She often produces content for a variety of financial blogs.|