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5 Ways To Save For Your Child’s Education

A college 529 plan is an excellent way to save for your child's educationHow to Save For Your Child’s Education

It’s no secret – having a child is expensive, and it only seems more so in our current economy. You want the very best for your kids, and will do anything in order for them to have the best possible future.  One of the things you can do to ensure their future is bright, is to start a college fund to make sure they have every advantage when it comes time for them to attend a university.  With experts predicting college educations to cost upwards of $95,000 by 2021, it’s only natural to feel a little overwhelmed just thinking about your child’s education.

Take a deep breath. Yes, saving for their college education starts right now, but it doesn’t have to define your financial decisions for the next 18 years. Here are some tips and ideas on what you can do today to make sure you have your finances in order when it’s time for college.

  1. Put Aside Only What You Can Afford at the Time

Like I mentioned earlier, having a child is expensive BEFORE you even factor in college. When it comes to choosing a savings plan, make sure you pick one that works with you in your current situation. Can you only squirrel away $30 a paycheck? Do it. Every penny counts.

  1. Teach Your Children the Value of an Education

Raising your children to value higher education will make them want to start saving on their own. Once they are at an age where they can get an after-school job, encourage them to budget their own paychecks and add some money to the college fund pot. This will teach them the importance of allocating finances, responsibility and also makes them feel like they are helping shape their own futures.

  1. Every Birthday Check Counts

When the kids are younger, put any birthday, Christmas, or Hanukkah checks they might get from relatives into their college fund. Savings bonds are also a nice way to save up.

  1. Research Loan Options

More than likely, you’re going to have to take out a loan when it finally comes time to send them off to school. Make sure you research all your options to guarantee you’re getting the best deal. You don’t want to end up spending more money than you initially thought because of hidden fees, interest, or other costs.

  1. Look into a 529 Option

529 plans were designed with your child’s educational future in mind. Most states have 529 options and you can choose from a savings plan or a prepaid plan. This is a good option to look into because 529 plans usually have tax advantages, benefits, and more. They are also exempt from state financial aid calculations.

Remember getting your children through college doesn’t have to stress you out for the next two decades. By making smart decisions now, you can save yourself some financial and emotional headaches once it comes time for them to finally leave the nest.

Angie Picardo is a staff writer for NerdWallet, a personal finance website dedicated to helping parents and students find the best credit cards.

Comments

  1. Mandy MacKenzie says:

    I paid for my own tuition, books and housing and I instantly regretted that I did not follow this plan… actually, that my parents didn’t: “When the kids are younger, put any birthday, Christmas, or Hanukkah checks they might get from relatives into their college fund.” Of course as a kid there are a lot of more important things to spend gifts of money on than saving for education way, far in the future, or at least we think.

  2. Patrick Jones says:

    A very informative post, with a lot of good advice. However, earlier I read another article with similar tips, of which one contradicted you first point “Put Aside Only What You Can Afford at the Time”. It suggests to set an amount to put aside from each pay check, or monthly and then work the rest of the family budget around this amount being unavailable. I think both your suggestion to only set aside what is affordable, and to set aside a specific amount on a regular basis have merit. So perhaps it should be recommended to save an affordable amount, on a regular basis, in a tax sheltered education account.

    • Good point Patrick and am glad to see that you’re interested in this concept. I too understand where both opinions have merit, but the bottom line is that you simply can’t put in more than you can afford. Probably a slight change in wording would help to make more clear. We appreciate your sharp eye and hope that you’ll be back frequently.
      Gust recently posted..5 Ways To Save For Your Child’s EducationMy Profile

  3. I’m a new dad and like most new dads, the responsible ones at least, I constantly research parenting tips, ideas, plans, techniques, etc. Some of it’s confusing, or maybe I’m just suffering from information overload. This article on how to save for my baby’s education is really clear and easy to understand though. Thanks for that! I don’t make a lot of money yet, so it sparked my motivation to start saving for her education now to be sure funds are going to be available when needed.

    • Thanks for your timely comment. I’m glad to see that you’re thinking of your child’s education this early. You might not be in a position to start with large contributions, but by starting early with small amounts, it will all add up over the next eighteen years or so.
      Gust recently posted..5 Ways To Save For Your Child’s EducationMy Profile

  4. Patrick, I really like your compromise on those contradictory points that you mentioned!

    As to Mandy, maybe working out a plan with your child wherein you set aside the smallest gift of money each holiday would be a good alternative? It’s definitely hard to explain to the young ones that they’ll thank you later!

  5. We have 4 children and it is insanely hard to try and gather all of the funds needed for their educations!
    Especially the youngest ones when I think about how much more this will cost in the future.
    We did get lucky with our older one, and we are counting on scholarships for the rest, and of course grants, but those cannot be relied on and I have yet to start saving, honestly. Something always comes up.
    These are some good tips! We do try and teach the kids about saving and the importance of saving, and giving to charity. So, when they do receive birthday money and earn their allowance, they are required to put some away to go along with our addition to their monthly savings deposits.
    (I have been a bartender for 21 years and try to keep as much of the change at the end of the night for tips, rather then cashing it in. This adds up much quicker then some would think!)
    I am reqesting info on the 529 plan, this sounds like something that would be the most beneficial for us and our children’s ages.
    Thanks for posting such useful info!!
    I am sharing on my networks:)

  6. I agree, as a kid you don’t think these things are important, but once you have all the expenses of college you wish you had saved every cent. Even if you follow all of the other advice, having this even as spare change account would be really cool.

  7. Christina Carter says:

    My mom started making us save early on because she said that an education was important and that we didn’t know what kind of financial aid that we would qualify for and it is better to start fresh out of college being debt free versus owing a lot in student loans. She split out money between a 529 plan and a savings account at a bank credit union. She did this because she said that the 529 would pretty much guarantee that we wouldn’t touch it but the savings account could also be used if we had an emergency.

  8. Financial literacy is unfortunately very rare. Often we don’t find out about mortgages, student loans, or even how interest works until we are right in the middle of all these things. It’s definitely important to teach your kids early on (no matter how terribly boring it may be!) to at least be familiar with these concepts. It’s so nice to hear that some of you are taking the time to speak to your kids about the importance of saving, and especially for something like higher education.

  9. JTomlinson
    Twitter:
    says:

    I can’t deny that it would have been nice to have my entire college education paid for and not have to worry about paying it back, but we never have any money to spare to put into a college account for our daughter. She’s going to have to take out student loans and work her way through college like I did. Luckily hubby works for a college and immediate family members get 75% off of all classes, fees, and tuition if they go to that school, so we’re hoping she’ll want to go there when she’s ready for college.

  10. Again it comes back to helping your child to learn about budgeting. When they start working they should always be clear that some of their money must be saved for something. That way when they want something they will have the money instead of going out to borrow. Saving together towards college is a great way to bring the family together too.

    Enjoy the journey.

    Mandy
    Mandy Allen recently posted..What A Week It’s Been!My Profile

  11. This is a very timely article. My sister is expecting and the big topic of discussion is how to save for the new baby’s education. Great tips! Thanks.

  12. I have 7 children, and we’ve made it clear to them that we won’t be in a position to pay for their college education. We’ll be steering them towards scholarships and paying their own way, which is fine. They’re free to stay with us and be “kept” while they’re doing so!

    • Carrie, 7 kids? That’s a full time job as it is! I can see how no matter where you pinch pennies, saving for their education is near impossible. Despite that, however, I’m glad to hear that you have talked to them about the reality of finances and money and talked to them about their options, so they can start planning and researching when they are ready. Also, living rent-free while they progress will definitely allow them to begin saving on their own, whatever their personal and financial goals may be.

  13. Joe Belot says:

    $95,000!! Wow, I’m in the wrong business. I like the tip of birthday checks and bonds, every little helps so thanks for the advice. I’m of the mindset where I’ve been saving from day one for my little one but it still seems like such a long way to go.

  14. Isabell M. says:

    I just became a parent and already I’m planning for my son’s education. But no matter how I work the numbers, without a scholarship of some sort or crippling student loans I don’t see a decent university in the cards. It will be tragic if incurring student debt loan is the only option to my son when it comes time to go to university. In the meantime, all I can do is my best and follow the basics like what I find here.

  15. Samantha P. says:

    Since I was a baby, my parents tried saving money so they could put me in college. Problem was, they were super poor. Dad had to work two jobs to support me and mom. So by the time I was in high school, they had only about $400. This went to paying for my driving classes so that I could get my driver’s license. I wonder if the 529 would have helped them?

  16. Thank you for such great advice. I have two kids that I need to save for, so this was perfect.

  17. I have a three year old son. I plan to save some and help but will expect him to try for scholarships and his own loans such as Sallie Mae. Too many people get strapped in debt and then their kids can’t get a job in their degree field. My grandparents spent to much on my aunt and are now years later literally out of money, it’s tough! I would not want to do that to my son…my mom pays several hundred dollars of her own money on their care. At this point, it’s a see where it goes situation.
    Kathleen recently posted..Ramblings from the BurghMy Profile

  18. I have never heard of the 529 Option. I will have to look into it. I have two children and educational expenses will be very high.

  19. Hey, Thanks for sharing this informative and helpful post with us. Really you have helped many parents who wonder about their kid’s future education. They are looking for various options to plan out their future education for their kids. Saving is an art and one who knows this art can survive easily. So saving in different ways will help in saving a handsome amount for kid’s college fees. It’s good to know about the 529 plans and I think these plans are quite helpful in saving a big amount.

    • Thanks for stopping by Daniel. Yes, you’re so right about saving being an art. Unfortunately, so many individuals have been unable to learn that art, and then must resort to very large student loans when their child enters college. The student loan program here in the US is having many problems with delinquencies, and a part of the problem is that many loans are just too large, and the graduating student can’t handle it.

  20. Donald Quixote from Ogden Colleges says:

    This is really great advice. I really wish that I had been able to pay for my college education from saving, but I really didn’t have any, so I’ll still be paying that off when I’m old and decrepit.

    • Thanks for your comment. In our current economy, many individuals have to take the longest term to repay student loans, they have little choice. Many others who can’t get a job in their degree field and have to settle for a much lower paying job, providing they are able to get one, are saddled with very high loans and repayment schedules that would blow your mind.
      Gust Lenglet recently posted..Debt Management TipsMy Profile

  21. Yes i am also agree with all above points because financial aid is determined based on income and assets from the year prior to applying for aid — in most cases, the student’s junior year in high school — students with large amounts of savings in their name could end up losing a hefty sum of free college cash.
    Mamta Chopra recently posted..SSC Stenographer Result 2013 – Grade C ,D SSC Result at ssc.nic.inMy Profile

  22. Great advice. This is really very helpful for everyone those are thinking about their child future and education. Everyone want to provide every possible things for child future and education is one of them initial. I have also started saving for money for child. You have given some more interesting advice that will really helpful for me. Thanks a lot.
    HugoBrennan recently posted..GATE 2014 Exam Results and Score CardsMy Profile

  23. I think the best way is to set up a different account or fund for it and continually add to it so that it grows over a period of time. Slowly and steadily, it does reach a sizeable amount over the years and probably would be enough to pay for your child’s education.
    Davis recently posted..The Three Best Ways to Find a JobMy Profile

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