How To Save For Your Child’s College Education

How To Save For Your Child’s College Education

Start investing in your child’s college education early so you can worry less in the future.

By Julie Meyers Pron

With a plethora of methods to save for college — such as the 529 plans, Coverdell Education Savings Accounts (ESAs) and prepaid tuition plans — you’d probably like to sit back and watch the money come in.

Sadly, saving for college isn’t as easy as selecting the best program and kicking up your heels. Parents still need to contribute to the savings programs, and that may prove difficult, especially if you were affected by the economy’s downturn — which leads to questions: How can you creatively and successfully help save for your child’s college education? And how much must you save?

Let’s start with how much money to save. According to figures from the National Center for Educational Statistics, the average total (including private for-profit colleges) for a four-year, full-time degree is expected to be $88,368. Gulp. Is this realistic? How many families can save for each child to go to a four-year university and cover all of their children’s college educations?

More realistically, I calculated saving $100 per month into an imaginary 529 plan. The calculator used historical data to make assumptions for taxes on savings and calculated that I’d have saved $34,320 by the time my 4-year-old entered college. Another gulp.

But some savings are better than none, and $34,320 will certainly make a dent in a child’s college expenditures.


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Next, let’s consider ways to save for college.

Teach Your Child To Save
While taking your kid to a CPA for a surprise lesson in finances might be a bad idea, teaching them the concept of saving can only lead to her having more responsibility when she gets older. There are plenty of ways to teach your children about money. Some of them are even fun!

If she keeps up the idea of putting money away, she may be able to buy her own car, which puts less stress on you and your bank account. And while any contribution toward a four-year full-time schedule at a university including room and board most likely be a drop in the bucket of tuition, her ability to save will pay dividends in the future.

Take Advantage of Automated Transfers
Many paychecks are now automatically deposited into bank accounts, so the check never sits in wallets or touches the hands of the hard-working earner. This is a great way to guarantee that your money isn’t missing out on interest payments by sitting in your wallet. But it also gives you less control over what you’re doing with your earned income, as you may just let it sit in your primary account. Take some time to budget your money, and determine how much you can contribute monthly to your child’s college savings program. Then contact your bank and learn how to create automatic transfers.

Use a College-savings Linked Credit Card
Most banks have moved into points-based credit cards, helping you to get a little something back on your credit card purchases. In addition to vacation, cash back and store-focused point systems, there are many college-savings linked credit cards that will deposit your cash-valued points into a college savings plan. This way, rather than spending to spend more, a few pennies will be deposited for your purchases into an account that looks to your child’s future.

How is your family saving for your child’s college education?

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