Making College Savings More Manageable

Whether you have a young child or a teen in high school, the thought of a college education might make you wonder how you will help them afford it, or even if it is financially feasible for you to do so. The good news is there are several ways to help cover the cost.

Consider Financing Options

Even if you can cover some of the cost, you might not be able to pay for a full four years of schooling. That’s why it’s a good idea to keep your options open. Your child can look into getting student loans, either from the government or private lenders. You can also choose to send your kids to college and cover tuition payments with a low-rate Private Parent loan from a private lender. That way, your kids won’t have to face such high student debt once they graduate.

Get Started with Saving

Now is the best time to start your saving process. As with all other types of investments, compound interest and time are on your side when your child is still young. There are also tax breaks for parents of college students you can eventually take advantage of. If you can start saving up early, you will not need to put as much aside in the long run. Look over the budget to see where there is room to set aside funds for college tuition. Even if it is just a small amount each month, it is a beginning. If your expenses decrease or you bring in more income, you might consider increasing the savings rate proportionally. Look for areas where you can cut expenses.

Creating a Plan

It is critical to estimate about how much you will need to save. That means you will need to think about the total cost of their education and how much of that you can realistically afford to cover. You can use a cost calculator to estimate the costs in the future. Then you will want to think about where the funds will come from. If grandparents or other family members give gifts, some of the funds can come from there. And your child could get financial assistance from other places to. Remember, the more you cover, the less debt your student will have later. Once you know how much you will cover, divide that number by the amount of time you have to save so you can figure out how much to budget each year.

Be Consistent

If you want to have enough funds to cover the cost of school, you need to make sure you are regularly contributing. Instead of setting aside a certain amount each year, you will want to put in a little each month. That way, you can take full advantage of compound interest. Over a longer time, every month will count. Another option is to put in a larger amount upfront, especially if you have a 529 plan. That way, you can make up for some of the lost time. Still, make sure the total amount is no more than the gift-tax amount. If you are married, that amount is usually more than if you are single.

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