The thought of planning for college and figuring out how to cover the giant sticker price can seem like a long road, especially if your kids are learning their ABCs.
However, there are many tangible things you can do even when your child is young to make sure they have enough money for the day they move to boarding school.
“The biggest thing I recommend to parents is to take away at least half of the money given to a child for their birthday, 16th birthday, and Bar or Bat Mitzvah,” said Christopher Rim, founder and CEO of the admissions consulting company in Command Education college. Post office. “Put those funds into a high-interest savings account and let that money grow. Don’t touch it until you pay for college.”
Then, do what you can to put money aside each month, and the best thing you can do is start saving as soon as your baby is born.
Birth to age 5: Start strong
While this stage of life couldn’t be busier, with a host of added costs for everything from diapers to daycare, it’s just as important to map out a college savings strategy that will work within your budget.
Half of Americans don’t know what a state-sponsored 529 plan is, according to Edward Jones Investments. These college savings plans are easy to set up and grow tax-free to use for education costs.
There’s also no fixed amount of money you’re required to deposit into these funds, provided you don’t go much higher than what your total college costs will eventually be. Even if you can only save a small amount each month, that money, which can be used for tuition, fees, room and board, textbooks, and even your child’s laptop or other technology needs, will add up over 18 years.
“My advice is to set up an automatic monthly contribution, even if it’s just $25,” said Andrew Lokenauth, a New York City personal finance expert and founder of TheFinanceNewsletter.com. He added that you can apply for credit cards, such as the Upromise Mastercard, that allow you to earn rewards for your 529.
You can also encourage relatives to contribute a substantial gift to the 529 instead of giving expensive gifts to your children. This year the tax-free amount an individual can gift is $18,000 and, in 2025, that number will rise to $19,000.
“Also, it’s a great idea to consider opening a high-yield savings account as a reserve fund and let that money grow year after year,” added Lokenauth.
Elementary school: Meet with a financial planner
We all know the power of stockpiling your funds, and that’s especially important when it comes to college costs, said Laura Medigovich, vice president and senior financial planner at Janney Montgomery Scott, a wealth management firm.
“If you wait to start saving until your child is 10, you have eight years until college,” she said. “Eight years of saving your money is better than two, but it’s not as good as having 18 years to build up the balance in your child’s college account.”
That’s why Medigovich suggests taking the time now to work with an expert. This person can help you crunch the numbers and help you set aside enough money for college, which translates into less stress once your child graduates from high school.
“We like to start with the bottom line you’ll need,” she said, adding that the four-year in-state college average is $29,910 a year, according to the College Board, while the private college average is $62,990 a year. You should factor in an additional 5% inflation rate when planning, depending on how many years away from college your child is.
“If you want your child to attend a private college, it may mean you have to put aside $800 a month now,” she said. “If you can only make $100 a month, an advisor can work with you and help you find ways to save as much as possible.”
Middle and High School: Be creative
When your kids have reached this age and stage, it’s likely that they’ll be able to do some odd jobs on the side, whether it’s babysitting or working as a summer camp counselor. Once your kids start getting paid, encourage them to leave half of that money.
“Put it down as college money and put that money in a high-interest account,” Rim said. “Your child may want to use that money for a spring break trip or to help pay for certain expenses, and having that money in the future will be extremely helpful.”
This is also the ideal time to have honest conversations about money, Medigovich said.
“It’s hard to explain to your kids that you can’t go on a two-week vacation because you’re saving for their college education, but it’s so important,” she said.
“The goal is to create a partnership with your child so that he or she understands what the goals are for them,” Medigovich said. “It can also instill a love of learning, which is what college is all about.”
Christopher Rim encourages families to research merit-based scholarships that are open to students even at this point in their educational careers.
“That’s how many of our students end up paying for college,” said Rim, who also paid for college that way. “Most of the students we work with apply for scholarships as early as ninth grade, and that’s a big component of not only paying for college, but getting into selective universities because colleges want students who have won awards and honors.”
Best of all, these competitions—many are tied to a special interest, whether it’s chess, golf, or STEM—usually award a cash prize to help pay for college.
“An award can come in at $20,000 or even $50,000,” he said, adding that the best place to search for scholarships is FastWeb.com, a free scholarship search platform. “And, if you start early, there’s less competition. I’ve seen it myself — and I’ve done this for nine years — that every year there’s a ninth grader who wins a scholarship because no one else applied.”
Additionally, to make some college savings, encourage your high school student to take as many AP classes as possible during the school year for college credit. Or, suggest they take classes at your local college over the summer to lower overall semester costs, suggests Bobbi Rebell, a certified financial planner and personal finance expert at CardRates.com.
This is especially important if you haven’t made enough regular contributions to your child’s college fund and are very worried about how you’re going to pay the bills once they start coming.
“You have to start where you are,” Rebell said. “No one is turning back the clock, so don’t be shy and hide the problem. The best thing you can do is correct.”
And, whatever you do, now is not the time to stop funding your retirement accounts in favor of focusing on your child’s college expenses.
“There are student loans available, but there are no retirement loans, so you don’t want to be in a position of dipping into retirement to pay for your child’s education,” Medigovich said. “As painful as it may be, your child’s best option may be to go to a community college for two years to give you time to put money away or you may need to discuss taking out loans of college.”
Pairing the reality of how much money you’ve set aside for college should also align with how you manage your child’s list of target schools, Rebell added.
“Don’t let your child apply to schools where they won’t qualify for financial aid and don’t have a special talent to secure a merit-based scholarship,” Rebell said. “If your child wants to go to a specific school, sit them down and explain that you can’t retire and you can’t get a higher paying job, so that’s the reality. Then work together on the options that work best for your family.”
After all, your kids probably already know how expensive the colleges they’re interested in are.
“Kids know more today than we as parents ever did,” Rebell said. “That’s why I think it’s very important to have a conversation with them as soon as possible, explaining what you’ve saved and how it’s going to work.”
By being transparent, you can even keep your kids fiscally motivated, including suggesting they pay 2% of overhead costs, Rebell said.
“It gives them a stake in the college experience,” she said. “You can also offer to give them back some of their tuition if they work hard and are able to graduate early. That way, they’ll finish college sooner and keep the whole family in good financial condition as well”.
#road #top #college #early #start #saving
Image Source : nypost.com