From choosing the right sunscreen to making sure they eat enough vegetables, the day-to-day task of raising kids is a lot of work. Add in big things like choosing the right elementary school, and it gets even more complicated. And paying for college? That one’s big and looming. When parents hear stats about the growing costs of higher education, it can get even more intimidating. But it doesn’t have to be. Here are some ideas on tackling the task of saving for college.
1. Get in there and get started.
For many people, taking the first step is the hardest part. Putting it off one more day doesn’t seem like such a big deal, and getting started feels like a monumental task. The truth is, it’s not as difficult as it seems, and you’ll feel much better after you get the ball rolling. You can start by taking five minutes to set up an appointment with your financial advisor. You can also do some research on college investing and saving options on your own.
Even if college is a decade or more away, it’s impossible to start saving too early. The combination of time and a well thought out plan may make working toward your goal much easier. Parents who start adding to a 529 college savings account when their child is three, for instance, have 15 years to invest and potentially ride out volatility, swings and recessions. That can potentially be a great way to conservatively build toward an education nest egg.
2. Make it a family affair.
One way to make saving easier is to get more people involved. Saving and investing toward college doesn’t have to fall to the parents alone, and when you have a lot of people involved, even small contributions can potentially add up. One unique benefit of 529 accounts is that others can contribute to them, too. Grandparents, friends, aunts and uncles can all add to it if they’re financially able. Even for very young children, think about asking for college saving contributions on birthdays and holidays in lieu of gifts.
As kids are able to understand the concept, encourage them to put some of their birthday, holiday or chore money toward college savings, too. When they get older, support worthwhile moneymaking tasks like babysitting or a part-time job. Asking children to contribute opens up an important dialogue about finances, and it also sends a very positive message: We know you’re going to college. Both of those things will benefit your child in the long run.
3. When the time comes, start making a college plan.
Another way to make saving easier is to make your money work harder (or stretch further). As children get closer to college age, it’s a good idea to start making a plan with them and emphasize the importance of using college savings wisely. Starting in early high school, talk about the big picture. Is going out of state important to them, or can you make those saved dollars go further by choosing a school in-state? Do they need a two-year degree or a four-year degree? Now’s a great time to explain the cost-saving benefits of starting out at a community college or a local school and transferring later.
No matter the outcome of the discussions, emphasizing the child’s role in paying for college is a smart move. If they already have their heart set on going to an out-of-state school, for example, look over the numbers together so everyone is on the same page. If necessary, you can ask them to help ramp up savings. There may also be an opportunity for students to pursue interests and volunteer causes that could help them secure scholarships.
When they prepare to attend college, be sure to check into the Free Application for Federal Student Aid (FAFSA) process and timeline. And keep your child in the loop. Sitting down together and looking over total costs and monthly expenses is a great idea. If you’d like them to contribute or take on loans, break down the numbers and make a plan together.
Parents of young kids take note: When you start the college finances dialogue early, continuing it into the later years will be that much easier.
Take the first step.
No matter what age your children are, it’s true that their college education will be a big expense, but don’t let that discourage you from taking action. When you get the ball rolling, saving and investing toward college is something you can approach incrementally. Start now, start early, and those milestones (or milestone moments) will be much easier to handle.
Need a place to start? Evaluate the various saving and investment vehicles designed for education.
An investor should consider a 529 College Savings Plan’s investment objectives, risks, charges and expenses before investing. Participating in 529 plans does not guarantee that contributions and the investment return on contributions, if any, will be adequate to cover future tuition and other higher education expenses, or that a beneficiary will be admitted to or permitted to continue to attend an eligible educational institution. Investments in 529 Plans are not guaranteed or insured by the FDIC, SIPC or any other government agency, and are not deposits or other obligations of any depository institution and are subject to investment risks, including loss of the principal amount invested.
TD Ameritrade, Inc., member FINRA/SIPC. Stock investing is subject to risks, including risk of loss. Commentary provided for educational purposes only. Past performance of a security, strategy, or index is no guarantee of future results or investment success.