It costs a lot of money to raise children and one of the largest expenses that your family will encounter will be for higher education. Starting to save for college when your children are young is essential since it's such a large expense. There are many great ways to save for your child's education - ways that are easy, affordable and will make sending your child off to college an easier process. And when your child does go off to college, the steps that you took today will allow your child to focus on their education, not how they are going to pay for it. The key to saving for your child's education is to start when they are born. Read on to learn the five ways that my family is saving money for my son's college education, and getting started on your own savings today.
1. 529 Plans
A 529 Plan is an educational savings plan that is designed for families to set aside funds for future college costs. There are two types of 529 plans; prepaid or savings. A Savings Plan works like a 401K, you invest your contributions into mutual funds or other investments and your account will go up or down in value based on the performance of those investments. A prepaid plan lets you pre-pay for an in-state public college education allowing you to make one large or small monthly payments to cover the costs. Basically, you pre-pay for your child’s education at today’s price. We purchased the Pre-Paid plan for our son – we make a minimum payment each month and when he is ready for college, his 4 year degree will be paid for.
2. Upromise College Savings Plan
Upromise makes it easy for everyone to earn extra money for college. You earn money for college when you make purchases at participating retailers, restaurants, grocery stores, or use your participating credit cards. You can also sign your friends and family up for the program – their purchases will go towards your child’s college savings. I signed up for this program when my son was born and we already have several thousand dollars waiting for him to go to college.
3. Make it a Gift
When it comes time for friends and family members to purchase gifts for your child’s birthday or upcoming holidays, ask that they instead contribute to his college fund. Most people will have no issue with contributing to your child’s education over buying him the latest toy. And with grandparents, other family members and friends contributing to the overall college fund, you will see it grow much quicker than if you were saving the money by yourself.
4. Savings Bonds
Savings bonds are a very safe investment because they are backed by the credit of the US government. The principal and interest earned on the bond cannot be lost due to market changes. Savings Bonds are another great way for family and friends to contribute to your child’s education and can add up very quickly. Also, the Education Bond Program makes the interest on some savings bonds tax free when the bonds are used to pay for higher education expenses or rolled over into your 529 plan.
5. Make a Budget
If you don’t want to enroll in a 529 plan and don’t feel comfortable asking friends and family to contribute to your child’s education plan, you can budget for it yourself. You can use an online money management program to help you budget all of your finances at once. This way you can see exactly what your debt to income ratio is, where you can cut costs and budget more money to save for college. And to make sure that you are actually allocating the funds to your child’s education plan, have them automatically withdrawn from your checking account and placed into a saving account or mutual fund dog-eared for your child’s education.
How is your family saving for college?
Intro Image © Steven DePolo