How and When to Start Saving Money for Your Child’s College Education
All parents want their kids to acquire higher education and become demanded specialists in particular niches. Unfortunately, education in college isn’t free or at least affordable for the majority of learners. Consequently, students get loans to cover tuition costs and get a diploma.
These days, nearly 70% of all undergraduates in the US have study loans. The average sum borrowed by undergraduates is $30,000, which turns into the $1.5 trillion study loan nationwide. Doubtlessly, parents don’t want their kids to get loans for covering study expenses, so they do their best to save the required sum to cover the tuition expenses of their children.
Nevertheless, a lot of parents who want to start saving feel puzzled as they don’t know how much they need to save and when they need to start doing it. If you’re one of them, scroll down below and find detailed guidance on how to start saving money for your child’s college education.
Time To Start Saving
It’s an undeniable fact that parents need to start saving as early as possible. This tactic can help collect a larger amount. However, some pitfalls may appear when you can start saving for your kid’s college education. First of all, parents need to focus on paying off other debts that may include property, car, and other loans. Also, you need to ensure that you’re capable of performing monthly payments for retirement savings.
If you can afford to make university savings for your kid, after paying off all the bills and making essential payments, you should start saving from birth. Nevertheless, there is nothing mistaken if you delay it. The latest time to begin gathering dollars for university is when your kid finishes middle school.
How Much To Save?
It is the first question that arises in the minds of parents who want to collect enough funds to pay for their kid’s learning. Doubtlessly, you won’t be able to gather the demanded amount if you toss ten bucks once a week into a jar with the “university money” label. In case you don’t want your kid to become burdened by college debt, you should have a thorough plan.
For starters, you have to determine the class of college you want your kid to enter. The annual tuition prices among private and public educational institutions can be significantly different. Also, you should include approximate living expenses and calculate the inflation to collect the needed sum. At a minimum, you have to be able to pay $10,000 for tuition and up to $15,000 a year to cover your child’s living expenses. This bottom line won’t allow your child to pay for essay online on-demand and travel abroad on holidays. In such a case, your kid will likely need to find a part-time job or a side hustle.
Best Methods To Save Money
If you don’t want to collect bills in a jar, there are a lot of methods to accumulate funds. Moreover, all the methods to accumulate funds bring extra benefits. Nevertheless, they also have some drawbacks that you’re ought to know about before making your first deposit.
One of the most popular methods to collect funds is utilizing a regular savings bank account. It is an old and reliable way to keep funds safe. You can easily open an account and deposit any amount monthly or occasionally. It’s easy to withdraw bucks from a regular savings account. All the savings are secured, so even if an institution fails, you won’t lose your money. Also, banks provide up to a 2% interest rate. Unfortunately, the money on a regular savings account can significantly lower the financial aid, which is its primary drawback.
The 529 plan is one of the most popular ways to accumulate dollars for university, depositing after-tax bucks. The funds can be used for an annual tax deduction. Also, the money saved by using this account doesn’t affect the financial support, which is a tremendous benefit. Unfortunately, the funds collected on this account can be applied for paying education bills only. Otherwise, you will be fined.
If you want to have a broader list of expenses covered by your savings, it’s recommended to open the Coverdell education savings account. It’s quite similar to the 529 plan but allows you to spend funds on uniforms, tutoring programs, and other study essentials without getting a penalty.
Unfortunately, there is no secret way to accumulate funds for your child’s college education. If you want your kid not to be overburdened with a study debt, you have to conduct thorough research and make a lot of calculations. You have to build an approximate education plan for your kid and begin saving bills according to the minimum required needs.
Also, don’t be shy about using different ways to reduce college costs. Your child can apply for a scholarship or take the Advanced Placement courses in high school. Besides, some colleges foresee the opportunity for students to work part-time and use the earned money to reduce tuition bills.