We know that college educations are important, but are we really prepared to help our kids (or future kids) pay for college? With the costs of college tuition rising each year, it’s imperative that we have a game plan for saving for our kid’s education. Currently, Eric, my husband, and I don’t have children, but we do have college debt so we completely understand the impact of student loan debt. Every dollar saved for college is one less that your child will have to borrow which means less student debt and less stress for your child down the road!
Here are a few tips for parents to help save for their child’s education.
- It’s never too early to start saving for your child’s education. Small contributions add up over time. For example, if a family starts setting aside $50 a month when their child is born, by the time the kid is 18, he or she could have $10,800. Talk to the credit union about getting a Coverdell Education IRA, and see your savings grow even more for your student. If there’s no room for monthly deposits in your budget, just try to contribute whenever you can, birthdays and holidays are a great way to add funds to your child’s college savings. The more you save early on, the larger the return will be.
- Keep the savings account in your name. You might think it makes sense to open a college savings account in your child’s name but be cautious that this could compromise their financial aid. Students don’t lose any financial aid if they have $3,000 or less in a savings or checking account. But once the amount goes beyond that, 20 cents is subtracted for every extra dollar. Keep the account in your name to maximize your child’s financial aid.
- Don’t feel guilty for not saving enough. Even parents with the best intentions can get off track from their monthly budget of savings. Don’t feel guilty, remember you are only human and just take it one step at a time. Life happens and those extra funds may be needed for something else. If you’re like me and forget to transfer funds sometimes, you can use the “set it and forget it” method and set up automatic deposits so that you can reach your goals without any extra effort each month.
Do your research and look for the best saving options for your family. Once you settle on a plan you’ll be on the right path to helping your child reach his or her higher education goals. Remember, 1st Financial is always here for you to help answer all your financial questions.
Until next time,