How Some Parents are Saving For their Child’s College Fund
Paying for your child’s education is almost necessary in today’s economic climate. The average tuition cost for college is $10,423 to $39,723 a year, but loans tack on quadruple that amount in interest. By the time your children are college-age, tuition will likely cost much more than that.
Although paying for college is costly, it’s a great thing. Not only are you taking control of your family’s financial future, but you’re also helping them graduate without debt. What a head start!
Parents should make their saving goals $61,000 for public, $100,000 for out-of-state, and $120,000 for private college. With that said, how can parents even save that kind of money?
How Parents Can Save $61,000 to $120,000 for College
Parents should make their saving goals $61,000 for public, $100,000 for out-of-state, and $120,000 for private college. With that said, how can parents even save that kind of money?
- Pay Part of the Tuition to Lower Loan Payments
We want to buy our children everything, but that isn’t always possible. The real median income in the US is $37,522, so you require at least a second income to save enough for one child’s education. To make matters worse, nearly 63% of Americans live paycheck to paycheck.
If you’re not able to save up for 4 years worth of college, you can always tell your children, “You can fund your education with private student loans.” Every little bit helps, and your contribution would lead to lower interest payments. This helps them become debt free much sooner!
- Invest in a Tax-Free College Savings Plan
If you live in the United States, look into the 529 College Savings Plan. It works similarly to the Roth IRA in that it offers tax-free growth and withdrawals. Most 529 plans offer a passive investment, age-adjusting option that requires higher deposits now but reduces over time.
Not only does this option reduce your financial risk as you age, but it increases the interest you earn on every dollar, reducing your monthly payments further. Before signing up, compare fees and investment portfolio options and check if your state offers tax deductions on 529 plans.
- Make a Monthly Contribution to Your College Fund
We love our family, but unexpected costs come up all the time. Is it still possible to save for your children’s college tuition without the 529 College Savings plan or another equivalent? Yes, but you’ll need to save approximately $4,360 to $8,571 a year if your child is already 4 years old.
That’s the equivalent of $364 to $715 a month. If you have that kind of money available, then we recommend investing in a tax-free college savings plan anyway. Either way, you should commit to a monthly savings account contribution so you aren’t paying a bunch of money upfront.
- Adjust Your Personal Situation to Save More Money
Sticking to a monthly savings goal is difficult, even if you make six figures, so come up with a payment amount that suits your budget. You may need to adjust your spending habits or rely on discounts and promotions for necessities if you want to make room for a stocked college fund.
But you don’t have to rely on your income alone. If there are other important people in your child’s life, ask if they can add a bit extra to your child’s savings account. Even if your child isn’t grateful now, they’ll understand why they had to go without (if it’s necessary) to save for school.
