With rising costs, saving for college seems like a daunting task. However, by devising a plan and getting ahead of things, saving for college can be a lot more manageable than you think. Below are steps we recommend following throughout various stages of life to ensure that you are prepared.
Understand the Cost of College & How much You’ll NeedWhat is your family’s current financial situation? What assets do you have? Which financial aid options are a possibility? Understanding your situation and your options will help you establish a goal. You’ll also need to account for the “other” costs that come along with college. These include:
- Room & Board
- Books & Supplies
- Personal Expenses & Transportation
- Miscellaneous Items
- Insurance, cell phone bills, health expenses not covered by insurance, etc.
Begin Saving ImmediatelyIt doesn’t have to be massive sums of money. Just a little at a time can go a long way. A penny saved is a penny earned (without the costs of interest). With that being said, there are several big mistakes parents make when saving for college that you should avoid.
Look into College Savings Plans OptionsWhether your child has big aspirations and you want to contribute more or lessen their future financial burden, there are a variety of college savings plans that can help fit both you and your child’s needs.
- 529 Plans
- UTMA Accounts
- Coverdell Education Savings Accounts
Balance College Savings with Other Life Goals & PrioritiesYes, you want to provide your child with the best possible life possible, but don’t forget about your goals, too. Many parents make the mistake of using their retirement funds to assist in paying for college - bad idea!
By doing so, your retirement savings will lose years of interest earnings. It will also decimate the compounding factor that helps these accounts support your retirement – placing you years away from your retirement goals.
In addition, there are also penalties, taxes, and the fact that your child will have to claim the money you withdraw for his or her education as income – which could jeopardize financial grants and scholarships.
Start with the Following:
- Take the SATs and/or the ACTs (and do well).
- Submit a college essay with your application.
- Compare colleges & apply.
Get a Clear Look at CostsAs college gets closer, the costs needed become very clear. Begin to plan a budget and continue to track your progress as you get closer to your goal.
Apply for Financial Aid, Grants, and ScholarshipsSavings alone won’t pay for college. You’ll most likely need help, and that’s okay. There are ton of financial aid opportunities out there, many of which go unapplied for.
Regardless of your financial situation or financial aid options, one thing you need to apply for is FAFSA.
For other financial aid opportunities, speak with the school's guidance counselor and utilize the following resources: Learn more tips for filling out FAFSA and applying for Financial Aid
Understand Student Loans & Borrow With CareObviously, you want to avoid debt at all costs. With that being said, even savings, and financial aid aren’t enough. Explore your options when it comes to loans. Pick the ones that make the most sense, and won’t put you in a stranglehold of debt.
Remember, pay your loans off as quickly as you can. Some even allow you to pay them off while you’re in college.
Create a Budget and Stick to ItManage your money and be in control of your finances. You want to have enough money to cover daily expenses, emergencies, and possibly save enough to put towards paying off any incurred debt.
Start Building Good CreditHaving a good credit score can make your financial life a lot easier. Your score affects the possibility of getting things such as a house, credit cards, and insurance, and it can impact interest rates on loans.
Learn how College students can build good credit.
Get a Part-Time JobHaving a work-study job, paid internship or a summer job can help you reduce the impact of expenses and ultimately help towards paying off any debt.
Post-College: Continue/Start to Pay off LoansIf you weren’t able to begin payments on your loans during college, make sure to pay them off as soon as possible. Set-up monthly payments that you can comfortably handle. As you become more financially stable, increase that payment to ensure you’re paying them off as quickly as possible.