Whether your child is 2 or 12, it’s never too early to start saving for their education. Since the cost of tuition is expected to increase, creating a savings plan that helps cut education costs is a must. Many think that paying for the child’s college tuition isn’t possible, especially if they fall into the middle-class category. Or that it is far off, but it goes by quick, one day you are wondering what to put in a diaper caddy and the next your child is off to college.
However, even if you have a lower annual salary, there are ways to save money. You just need to know how to go about it.
1. Consider Saving Like a Monthly Expense
You need to think about your savings as if they’re a recurring monthly expense. Just like your mortgage, power, or even cell phone bill, you need to set aside a certain amount each month. One way to ensure you’re saving consistently is by setting up direct deposit or transfer. If you have a savings account, you can set up an automatic transfer each month at the same time. Don’t feel bad if you need to alter the amount or even skip a month. In addition, you can always increase how much you save when you have more to spare.
2. Save Your Refund
How many times have you received a refund only spend it on things that really weren’t worth it? To get your nest egg going, you should take your tax refund and keep in your savings account. Depending on your tax situation, you may be able to net several thousands by the time your son or daughter applies to college. You should also work with a tax accountant who can explain the different types of tax breaks that come along with paying for the child’s education.
3. Research Loan Options
Even if you save a considerable amount, your child may still need outside assistance. There are Earnest student loans that offer students a viable way to cover the cost tuition, books, and housing. Keep in mind that student loans are a responsibility, so it’s important to research all of the possible options before moving forward. With that said, it’s also important to choose a loan that’s right for your and your child’s education.
4. Keep Your Savings in Your Bank
If you’re thinking about opening an account in your children’s name, you might be doing more harm than good. If he or she needs to apply for financial aid, having money in an account could disqualify them. It’s better to keep the money in an account that’s in your name. Also, you may also be privy to higher interest return than on a minor’s account.
5. Consider Prepaying Tuition
While not always talked about, there are certain programs that allow you to prepay tuition. Also known as a 529 account, the money you deposit isn’t taxable and your money can also grow over time. In addition, your contribution levels are high without limits. This allows the money to grow with your child, which makes paying for college just a little easier. You also need to choose the right plan to maximize your efforts. Some tuitions plans offer higher rates of return than others, so be sure to weigh all of your options before choosing an account type.
6. Open an IRA Account
Most people associate IRA accounts with long-term investing. However, did you know that you can also use it to pay for tuition? Similar to a 529 account, you can contribute approximately $5,500 after taxes and $6,500 if you’re over 50 years old. The good thing about IRAs is that once you have had it for five years, you can then withdraw the money without penalty.
7. Change the Way You Shop
As funny as it may sound, how you shop makes a difference. If you used to make large purchases without really thinking about the cost, it’s time to make a change. It’s better to think big-ticket purchases through, especially when you’re trying to save. If you’re trying create an educate fund but also need to buy a new car, you to crunch the numbers to determine how much car you can afford. Afterwards, you’ll have a better idea of how much you can save while buying a new car.
8. Cut Expenses
Even if you’re thrifty, you can probably still find places to cut corners. Many times, people sign up for free trials and forget that you did. Afterwards, you’re charge for subscriptions you don’t even use.
9. Set Financial Goals
Aside from what’s mentioned above, you also need to create financial goals. Many times, we focus so much on the now that we forget to think about the future. Unfortunately, not planning ahead can cause you to fall short. You can avoid this by setting financial goals for the present and in equally spaced-out intervals. Say you want to have at least 5,000 in your account within two years. What can you do now to make that happen? Set smaller goals and each time you reach them, you can set a new one. The most important thing is to remember is that consistency is key.
Mo Mulla is a work from home dad who enjoys reading and listening to music, He loves being a dad and husband to a growing family. He also loves writing about his passions and hopes to change the world, 1 blog post at a time!
