There is no denying the high cost of college, but that is not saying steps cannot be taken to lessen the burden. In fact, the right steps can significantly reduce the need for student loans and even eliminate them entirely. In an age where most students graduate from college with tens of thousands of dollars in debt, the knowledge of how to save money for college is more important than ever.
This is the most important tip when it comes to saving money for college. Without a clear goal in mind, it will be difficult to plan how best to accomplish it. First parents should decide how much tuition will cost when their son or daughter goes to college, adjusting for inflation of course. This will give parents a better idea of how much they need to save each year in order to reach their goal and how much of their income they should try to set aside.
Start saving now
College costs are high, and they are only going to get more expensive in the coming years. That is why parents and students should start saving as soon as possible. Starting very early will also allow parents to take advantage of compounding interest.
529 savings plans
These tax-free savings plans are set up by states and educational institutions nationwide. The money is put into various types of investments, much like a mutual fund, and all money is free of federal taxes as long as it is used for approved education spending. There are limited income restrictions and contributions can start very low. They are explained more in this Wiki article.
Prepaid tuition plans
It is frustrating watching tuition costs continually rising, but prepaid tuition plans can help. They are basically savings plans that allow parents to lock in tuition rates, even if the child will not be going to that institution for years. They also have tax benefits. Learn more about them here.
Coverdell Education Savings Accounts
These are special savings accounts that parents can make limited contributions to every year. While the money contributed is after tax, and returns on the investments are tax free, as long as they are spent for approved education expenses. Income and other restrictions on these accounts can be found here.
Let’s face it, most people are going to have to make sacrifices as some point if they do not want to help their children pay for their educations. By starting earlier and making the smaller spending sacrifices now, it becomes possible to avoid bigger spending sacrifices later. This will help avoid debt interest on top of the interest that will be earned from savings. For advice on budgeting plans and tips on saving money, this following guide to budgeting will help those who really want to save for college to get started on the right path quickly.
Set up automatic deposits
Monkey see usually means money spend. Automatic savings deposits mean that the money will be put away before it becomes tempting to spend it. From regular savings accounts to some of the specialized plans mentioned in this article, there are lots of safe places to send the money were it can do some good for the future without having to lift a finger.
Ways to reduce university expenses
Sometimes, it is necessary to make choices that go beyond budgeting and saving to control high college costs. These include:
- Go for a cheaper school. While those going to the most expensive schools generally have higher incomes, a costly private education is not always worth it when the debt burden is considered.
- Online education. The internet is certain to really shake up education in the future. Consider taking at least some classes online if they are cheaper and credits can be transferred.
- Shared housing. Living in shared housing off campus often offers the cheapest accommodation. Do not make any assumptions and check everything.
- Used, rented and digital books. There are ways around the high costs of books. Take a look at save on textbooks, Bookrenter coupon codes and eCampus book rentals.
- Military service. Not only will this help pay for college directly, but some types of military training will qualify for college credits. Of course, this is not an option for everyone though.
Remember, saving for college does not have to be painful. Students and their parents can easily build a college fund by simply coming up with a game plan and sticking to it.