Did you know that the average price of college in the United States is over $35,000 per student per year? If you think that your child may want to attend a university in the future, you need to save for college now.
How can you even start saving that much money? Eighteen years will go by in a flash, so can you possibly save up enough? We’re here to talk about it.
Read on to learn how to save for your kid’s college fund.
Consider Hiring a Financial Advisor
If you have the money to spare, consider seeking help from a financial advisor (and if you have quite a bit of money to spare, seek out more wealth management information from a qualified advisor).
Many people think that financial advisors are only for people with a lot of disposable income, or only for around tax season. This isn’t true. Anyone who’s trying to save or invest money can benefit from a financial advisor.
They can help you create a budget, trim down unnecessary expenses, make investments, choose the right bank accounts, and more. While their services do cost money, you should be able to save and earn more money in the long run when you take their advice.
All parents who plan on sending kids to college should, at the very least, schedule a consultation with a qualified financial advisor to see if they can help.
Start From Infancy
It’s possible that your child will choose not to go to college in the future. They may decide to hit the workforce, join a trade, or just take a year off to figure out what they want to do. That said, you should still start planning for your child’s financial future from the time that they’re born (or preferably from the time that you find out that there’s a baby on the way).
You want to give yourself as much time as possible to set aside money. This will take some of the pressure off of you in the future and it will put far less strain on your budget. Trying to save thousands of dollars over eighteen years is far easier than doing it over the four years that your child will spend in high school.
Even setting aside $100 per month from the time that your child is born through the time that they’re 18 will mean that they’ll have over $21,000 in the bank. This doesn’t include interest.
If you’re able to set aside $100 per week, your child will have over $90,000 in the bank. Of course, the key to this scenario is investing those savings so they grow with interest.
Any amount of money that you’re able to set aside on a regular basis will make a huge difference as long as you start early.
Don’t Underestimate Investments
When you’re putting money away for your child, resist the urge to put it all in basic savings accounts. Instead, invest some of it.
There are safe ways to invest. Avoid risky investments like volatile individual stocks or cryptocurrency. At the very least, only put a small percentage of the college fund in those types of investments.
Instead, consider savings bonds and mutual funds.
Savings bonds are perfect for college funds. While they don’t gain a lot of interest, they gain more interest than savings accounts and they can continue accruing interest for 30 years. In other words, you have an incentive for leaving the money alone until your child needs it.
Mutual funds are managed by financial advisors. They take all of the hard work out of investments and you’ll know that your money is in good hands. Keep in mind that if you start a mutual fund, however, it may impact your child’s ability to receive financial aid.
Teach Your Child About Money Management
When your child is old enough to start learning about money on their own, involve them in their own college savings. They shouldn’t have to put aside all of their money, but this will be helpful in the future.
Many parents start paying their children for chores when they’re young. If you choose to do this, it’s a great way to teach your child about the value of a dollar. They’ll learn how to save up for things that they want.
For extra realism, take “taxes” out of your child’s chore money. Instead of keeping this money for yourself, set that money aside and add it to your child’s college fund. Your child should receive that money when they’re ready to go to school or otherwise start their adult life.
When your child is old enough to start working (as long as they’re able to balance work and school) consider encouraging them to do so. This will allow them to have their own spending money and they may start contributing to their own college fund.
No matter how much money you have saved away for college, you should still always help your child find and apply for as many scholarships as possible. You’ll be surprised at the number of scholarships that they qualify for.
Encourage them to talk to their guidance counselor about scholarship opportunities. The counselor should be happy to provide them with a list or guide them to a database full of potential scholarships. They may even help your child set up an application and write a cover letter (if applicable).
To help your child qualify for future scholarships, start encouraging extra-curricular activities when they’re still young. Sports, clubs, and even community service projects can all qualify your child for unique scholarships.
How to Save for Your Kid’s College
No matter how young your child is now, it’s the right time to start setting aside money for their future. Use these tips to develop a plan for how to save for your kid’s college and you’ll set them up for financial success.
A good savings plan can lead your child to a bright future.
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