By Kelly Hodges
Calculating the cost of your child’s college education and researching different investment options are important first steps in a college savings strategy. The critical step, however, is to actually start putting some money away, and to do it now! No matter what the age of your child, college will be here before you know it, and procrastinating by even a few years can make a big difference when it comes time to cut the tuition check. By prioritizing saving for college and using some creative thinking, almost everyone can come up with some extra cash for that 529 plan or Roth IRA. Here are a few ideas to kick-start your college savings fund.
1. Automate your contributions. The easiest way to save for college is to automate it. Determine what is affordable for your own situation, and then have that amount transferred automatically to the college savings fund each month. The college fund is treated just as any other bill, and the rest of the budget will need to adjust to accommodate it. Start with a comfortable amount, and then challenge yourself to increase contributions over time. Don’t be discouraged if it seems like your payments are minimal, they are far better than doing nothing at all!
2. Give the gift of education. During occasions where you would give your child a gift (birthdays, Christmas, graduation, etc.) make a contribution to their college fund as part of their present. What will be of greater value to your child in 5, 10, or 15 years; another toy or video game or a decreased college debt load? With all the gift giving that occurs over the course of 18 years, this is a great opportunity to bolster a college savings fund.
3. Ask others to give the gift of education. Often grandparents, aunts and uncles, and other special people in the lives of your child want to give them gifts on occasion as well. Discuss with them your desire to fund a college savings account, and see if they would be willing to contribute to that as well. The people who love your child will likely be happy to give such a meaningful gift. Your child will likely be happy not to get another ugly sweater that Aunt Millie picked out.
4. Utilize “found money.” Everyone comes across “found money” on occasion- the bonus at work you weren’t expecting, the tax refund, the $100 worth of change you cashed in at the bank, the $20 bill you literally found on the curb. This is money that is not already accounted for in your day to day expenses of living, so can be tucked away into a college savings account painlessly. Each time you come across some unexpected cash, stash it away in the college fund- you’ll be amazed at how quickly this can add up.
5. Have your child contribute. Once your child is old enough, she should help make contributions to her college fund as well. This fund is after all for her education, so it’s important that she also be invested in it (no pun intended). This is an excellent teaching opportunity as well, to discuss with your child the importance of saving, the power of compound interest, and other financial topics. Decide together what would be a reasonable percentage of her allowance, or babysitting money to contribute to the fund. Not only will it help build up the balance but she’ll learn some valuable lessons in the process.
6. Make sacrifices. If you feel like you’re not making much headway on savings but you want to make the college fund a priority, then it’s time to make some sacrifices. What on your list of monthly expenses could be scaled back to make room for college savings? Could you brown bag your lunch? Downgrade your cable? Eat out less? Ditch the smart phone? Everyone needs to look at their own situation and decide what the priorities are. Just keep in mind that whatever sacrifices you make now will seem inconsequential when your child graduates from college with a smaller (or no) amount of debt thanks to your selfless actions.
***Recommended Reading: Parts 1, 2, & 3 of the series, College Savings 101.
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Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of her employer or any other person or entity.
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