Posted on: 18.03.2015.

Author: Ana G

How to Start Saving For Your Child's College Education




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Saving for your kids' education expenses seems like a daunting task, but the good news is that you have time to prepare. Here are the steps you need to take to get your youngsters off to a good start when the time for them to leave the nest ultimately comes.

Get an Early Start

College costs are steadily increasing, and it can be hard to get a handle on what your little one's education will cost when college is so far off. A great way to get started with planning for these costs is by using online calculators to estimate the future cost of education. Getting a better idea of these future costs will give you motivation to save now.

The rise in tuition costs and the prevalence of student loans have prompted parents to be proactive about saving for college. Over half of parents put away money for a college education. Failing to save may leave your kids with few options when they finish high school. Saving opens up opportunities by taking some of the financial pressure out of the equation.

Be Aware of the Costs




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Tuition can vary widely according to the type of school. Some areas offer subsidized tuition to residents, but your kids may want to attend a college that has a wider variety of course offerings. Tuition is just one of the costs you should be taking into consideration. If your teen is set on going away to college, room and board make up a large portion of the total costs of an education.

Books and supplies continue to rise in cost each year. Textbook publishers often issue new editions with slight revisions, and there is a strong possibility you won't be able to buy used. Depending on the major that your kid chooses, you could end up shelling out thousands for books each year.

Every college student needs a laptop to get homework done in the dorm, at home or in the library. While there are inexpensive options, the major of your teen's choice may require running certain programs on the laptop. Be sure that you are aware of these requirements before you go shopping.

Set Realistic Goals and Keep Saving




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You might feel you will never be able to save up enough to pay for your kids' entire college costs, but that is not the point. Set realistic goals that take your income and expenses into account. Go over your household budget to see how much you can really expect to be able to put aside.

The best way to accumulate funds in a college savings account is by saving regularly. This does not have to be a large amount. Saving just a little bit each week or even each month will add up over time. If you have babies or preschoolers at home, you have time to grow your savings.

Automatic deposits into a savings plan allow you to avoid forgetting to save for college. This option makes saving a lot like paying any other bill. If your youngster receives money that is supposed to go toward their college education, you can just deposit it into the designated account.

Know Your Priorities

While saving for your teen's college education is important, it is not the first priority in terms of saving. Your kids could get loans if they absolutely needed to, but you do not have the option to get a loan to pay for retirement. Saving for retirement comes first.

The best way to be prepared to help your teen pay for college is by budgeting and using money wisely now. Pay down debts and establish emergency savings before you focus your attention on college savings.

Ask For Help




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Your kid's ability to afford a college education is important to many people. Do not be afraid to ask your parents or siblings for a contribution. Your little one probably has enough toys and games, so getting a contribution to a college savings plan may be a solution when birthdays and holidays roll around.

Get Professional Advice

Growing your little one's college savings is an important financial goal, so it makes sense to consult with a financial advisor. These professionals are able to guide you to investments with low risk that still offer a return. Financial advisors can evaluate your savings goals, income, expenses and the amount of time you have to save to determine the best investment options for your needs.

Explore Your Options




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Since many parents are trying to save for education costs, there are many savings plans available that are geared toward this goal. Take the time to explore all your options. Each of these savings plans comes with positives and negatives that should be evaluated. 

There are often tax benefits available, but there may be restrictions on what your kid can use the money toward. Some plans let you earn rewards by using credit cards or shopping at certain stores. 

The best goal to have in mind when exploring your college savings account options is to find a safe place for your money to grow. Accounts that retain their balance and offer interest are best.

Avoid Risky Investments

Risky investments have a high potential rate of return, but keep in mind that you could lose money on these investments. Safer investments offer slow and steady rates of return that allow you to grow the balance in a college savings account over time. 

Avoid investing in risky options like artwork or collectibles. The value of these items depends heavily on the popularity of the work and the state of the economy. If your teen graduates high school during a recession, you may be unable to sell collectibles in order to access money for college.

Precious metals should be avoided because of the risk of theft. Gold and silver prices tend to rise over time, but the physical nature of these investments makes them a risk.

Save at Home




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Cutting items from the household budget lets you save faster. Every household needs a budget review once in a while, so getting ready to save for college gives you a good excuse to get this evaluation out of the way.

Make sure cuts in your household budget are manageable. You may forgo a few vacations and have fun at home for the week to have more to save for college. Selling items you no longer need helps to contribute to the college fund, and planning out all of your purchases allows you to get the best deals to save more.

You may find that major monthly expenses will be eliminated over time. For example, you may be paying hundreds each month toward a car loan. If you pay off your loan and do not need a new car, put the money you have been budgeting to pay the loan into your teen's college account.

Get Your Child to Pitch in

Teens should step up to the plate when it comes to helping with college savings. This teaches your teen a valuable financial lesson while helping to reduce the need for a loan. Encourage your teen to find a part-time job. A certain percentage of your teen's earnings can go toward the college account.

Your teen can work more in the summer leading up to college. Money earned during this period is perfect when your child needs to get books and supplies. It's also a great addition to the spending money while your kid lives on campus.

Seek Other Money Sources




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Scholarships are available if your teen excels academically or in the field. Encourage your kids to be active in high school to improve their chances of qualifying for scholarships.

There are even scholarships for students with unique hobbies or cultural backgrounds. Help your teens with the application process to give your kids the best chance of receiving much-needed funds. These applications often require essays, so encourage your kids to get help with topics, grammar and spelling issues from guidance counselors or teachers at school.

The last step before you teen starts college is to apply for financial aid. While loans are part of the financial aid package, you may find that your child qualifies for grants. This money does not need to be paid back, so it is worth the time it takes to provide information about household income and expenses.

The Bottom Line

College costs continue to rise faster than income each year. You may feel overwhelmed as you look toward your kids' future, but slow and steady savings efforts pay off in the long run. Start putting away a little each week and opt for safer investments to watch your kids' college accounts grow with them. Don't hesitate to ask family members for contribution, and consult with a financial advisor to get your college saving accounts established. These small steps add up to big savings over the years and create an opportunity for your kids to get off to a great start.