Saving for college tips is one of the most talked-about among students and parents. As every academic year passes, the tuition cost keeps on rising, thus deciding on how to save for a college education is more important.
You need not fear if you plan well and are disciplined, with some practical advice. Whether you are a parent planning for your child’s future or a student aiming to lessen debt upon graduation, there are numerous ways one might begin building up a healthy savings plan.
When Can I Start Saving for College?
The sooner you get going, the more time the money has to grow because of compound interest. An early start lets you save smaller amounts over a longer time, reducing the burden of trying to come up with large sums later.
It might mean parents start saving directly after a child is born, if not before. The earlier a dedicated savings account such as a 529 plan is set up, the more major the long-term growth can be.
For students themselves, it may mean setting aside part of a part-time income during high school and making a substantial dent. The idea is to begin small but continue doing so; even modest savings can grow into a substantial amount when given time.
If you can’t start immediately, then don’t be discouraged. It can never be too late to start saving for college. The important thing is to start at whatever point you are and make regular contributions to your savings.
7 Saving for College Tips that Work
In saving for college, there is the need to consider practical ways in which one’s savings can be maximized.
1. Open a 529 Savings Plan
A 529 is a tax-advantaged savings plan designed to pay education expenses. The money in the account of a 529 grows tax-free, and if money is used for qualified expenses, such as tuition, it isn’t subject to tax.
This is one of the most efficient ways to save money for college because of its tax advantages and high contribution limits.
2. Set Up Automatic Transfers
That’s pretty easy to do: automate your savings. Set up a monthly recurring transfer from your checking account into your separate college savings account. Then you won’t have to think about it, and over time, your money will slowly and painlessly build up.
3. Encourage Gift Contributions
Instead of gifts for birthdays or holidays, request that friends and family members contribute to a college savings fund. Many 529 plans will allow direct contributions from loved ones. This can go a long way in increasing the amount of money saved by quite a bit.
4. Take Advantage of Employer Benefits
Some employers offer tuition reimbursement or matching contributions into a 529. Check with your company to see if they offer any of these types of benefits and use them fully.
The use of employer-matching contributions could greatly increase the speed with which you save for college.
5. Apply for Scholarships Early
Scholarships are free money. The earlier you apply, the better your chances of getting them. Research and start applying for scholarships as early as possible, even in high school. Any scholarship dollar that you gain represents one less dollar you must save.
6. Cut Unnecessary Expenses
Take a hard look at your budget and decide where you can cut back. For example, try not to eat out as much, put caps on entertainment, or cancel some of the subscriptions that you do not use. This money saved from the cutbacks should go into your college funds.
7. Invest in Low-Risk Accounts
While placing money in the typical savings account is extremely safe, it will not be very good in terms of returns. Bonds and money market accounts are the best low-risk investments that, over time, will grant you far better interest rates but with little risk to your principal.
Reasons Saving for College is Difficult
With the best efforts, too, saving for college can be tough for a lot of families and individuals. Following are general reasons why it’s hard to save for college:
1. Increasing Tuition
College tuition has gone up over the years, most of the time outpacing inflation and wage increases. All this makes it very hard for families to keep pace with the rising costs, let alone save enough money to cover all expenses.
2. Competing Financial Priorities
Most parents either save for retirement, pay up a mortgage, or meet day-to-day living expenses. When money is being pulled in all directions, finding additional money to save for college can be tough.
3. Unexpected Life Events
Life is not predictable, and a medical emergency, loss of a job, or repair to an automobile can deplete college-bound savings in an instant. When setbacks such as these are experienced, it then becomes even more difficult to continue to save at a regular pace.
4. High Cost of Living
Where there is a higher cost of living, as in major cities-transportation, utilities, and food will usurp a great deal of the family’s income. It will not leave too much for savings, let alone college savings.
5. Student Loan Dependency
Many students depend so much on student loans, wherein savings for the same become delayed or nil.
Although the loan system can help them temporarily overcome the immediate costs of college, they lead to very long-term debt, after which financial burdens may arise once one graduates from college.
6. Lack of Financial Education
The thing is, most people just don’t know where to begin when it comes to building college savings. If one does not get proper guidance regarding savings options, investment strategies, and financial planning, it is pretty easy to feel overwhelmed and put off saving altogether.
Final Words
Besides being a great challenge, saving for college is one of the largest financial challenges. However, one can handle this challenge with ease, provided he or she can strategize and be disciplined.
The more long-term, or the sooner the saver, the better shall be the advantages of the 529 savings plan besides small and consistent earnings by both parents and children to make college more affordable.
Keep in mind that every little bit helps, and with the right approaches, one can alleviate the burden of college cost expenses and lessen the dependency on student loans.
It will not be easy, but if one is committed, he or she is well on his or her way to attaining a college savings goal. What are you going to do today to start building a brighter financial future?