You’ve worked hard in your career and you want to set your child up for success the same way. One gift you can give your child to set them up for a successful career is a college education. Student debt can be a massive burden on college graduates so paying your son or daughter’s college tuition will allow them to focus on their career rather than taking barista or bartender jobs simply to pay down their student debt. Saving up for your child’s college education could seem like a daunting task, but here are 5 tips to do it most efficiently and effectively.
1. Start Saving Right Away
Many people ask, when is the best time to start saving for my child’s college education? The answer is as soon as you can. Putting a small portion of your income away once a month upon the birth of your child can drastically decrease the amount you have to save later on in life. The best vehicle to save for your child’s college education is a 529 savings plan. Speak to your financial advisor about how to set up a 529 savings plan.
2. Save Based on School Choice
Colleges range in price based on type, location, and prestige. Private nonprofit colleges will cost more than public out-of-state colleges and public out of state colleges will cost more than public in-state colleges. For private nonprofit colleges, you will want to contribute $500 per month to your college fund, for public out-of-state you will want to contribute $400 per month, and public instate colleges will require $250 per month.
3. Save Half of Your Big Hauls and Redirect Expenses
Saving for a college education may seem intimidating, but having a strategy in place will ease the pressure. Each time you receive a “haul” of income such as a bonus from work, an inheritance, or a tax return, put a portion of it into the college savings account. Likewise, stay on the lookout for expenses which no longer occur. This could be diaper costs, a car payment, or anything that no longer dispenses. Take the money that would have gone towards these expenses and funnel it into your savings account.
4. Prioritize Your Savings
When it comes to savings, you probably have multiple accounts you are working on such as college and retirement. If you can only add to one savings account due to financial constraints, prioritize your retirement. Your children can take out loans for their college education but you cannot take out a loan for retirement so putting your retirement over a college fund is the right move in these situations.
5. Consider Cost Effective Alternatives
The traditional route to school can cost hundreds of thousands of dollars. This doesn’t mean it’s are the best option, necessarily. One way to get a college education while saving costs to study abroad. Countries like Germany offer free university. You will need to ensure you meet visa requirements– and it helps if you speak the language– but international universities can provide a great alternative to domestic ones and be much more affordable.
You may want to consider community schools as a precursor to a standard four year university. Community schools are a fraction of the cost of four year schools. By attaining an Associate’s degree at a 2 year community school, you will have saved a lot financially while getting a similar educational experience. From here, you can then transfer to a 4 year university and obtain your bachelor’s within 2 years. It’s best to research the community school before attending– look for schools which have high transfer rates– this means the school is committed to advancing your child’s education!
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017.