The New Year is the perfect time to set goals and start new habits. And while you probably have a host of resolutions you’d like to make FOR your kids, here’s one that you can make yourself in support of their educational future: resolving to set financial goals to pay for college.
When you consider the listed “price tag” for college, it is daunting indeed. Estimates for tuition (which doesn’t include room, board, books, etc., etc.) range from about $130,000 at a private college to $40,000 for in-state resident tuition at a public university.
Of course, scholarships and financial aid can greatly reduce those costs, but the fact is that college will be an investment, and one that it is never too early – or too late – to save for.
Here are some steps you can take to go to the head of the class in saving for college.
Consult a financial planner.
If you haven’t done so already, meeting with a financial advisor should be your first stop, as they can assess your individual financial and tax situation to give you targeted advice. In addition to traditional savings vehicles, they might direct you to one of these other avenues specifically designed for college savings.
The more and sooner you invest, the more your money will grow. If you still have a school-aged child, now is the time to invest as much as possible. Perhaps you are not that far out of “daycare years.” Consider that you were always able to come up with the money to pay your provider – take that same amount and invest it in a college savings account.
Pick three areas where you can cut back roughly $100/month – for example you might decide to only buy lunch twice a week (3 x $10 = $30 x 4 = 120/month); forgo one clothing purchase; and skip one weekend dinner and a movie ($60 dinner; $40 tickets and snacks). Just like that, you have saved $3,600 this year which you can call your child’s first semester of room and board.
Engage your child of any age in saving for college.
Having a bank account devoted to college savings helps keep it on their radar. Many families I know follow the 1/3 rule for allowances; 1/3 for short term purchases; 1/3 for charity; and, 1/3 for savings – which you can earmark for college. Sure, it’s still technically your money, but it’s working a lot harder in a college account than in a new set of headphones! Encourage them to do the same with money they’ve been gifted or have earned through an after-school job.
Engage your child in improving the odds of scholarships.
Grades count. Activities count. Citizenship counts. Here is where you can involve them in this New Year’s resolution! What are they doing in each of these three areas to ensure that they are hitting the mark to potentially earn the most they can in financial aid and scholarships? Are they in regular contact with the high school counselor to find out what scholarships are available? Have they looked online? A surprising number of small scholarships go unclaimed because students don’t apply! Have them search them out and remind them that cobbling together a lot of smaller scholarships can add up to big money.
Don’t feel discouraged.
No matter how little money you feel you have to allocate to savings, do what you can. Any money you set aside now is money you don’t have to come up with later.
(One caveat regarding the importance of saving for college: Never put money aside for college at the expense of your own retirement. Any financial advisor will tell you that can get loans and aid for college – but you can’t for retirement! Fund your own accounts first, and then put as much as you can aside for your child.)
One of the best gifts you can give your child – aside from a loving and supportive household – is helping to finance their college education. Using this fresh New Year as a catalyst to develop a financial plan to save for college will pay dividends for years to come!
Come back next week to see how a family fitness resolution can also boost your child’s grades!