Saving for college is important for both students and parents. Here are five college saving tips for parents to keep in mind and another 5 tips for future students!
5 College Saving Tips for Parents:
1. just start
The old adage “every penny counts” has never been more true than when it comes to saving for your kids' college, but the thought of saving for the equivalent of a second home can be so daunting to some parents that they freeze and don’t save any money for their kids’ education at all. Plus, on top of all your other payments, like the mortgage, insurance, and even your own school loans, putting money towards college can seem impossible. But it’s not. Don’t let that “freeze” happen to you.
It might seem overwhelming, but simply starting to put a little aside every month can really add up for your kid down the line. It’s better for them to have something saved rather than nothing at all, and any savings you accumulate won’t affect your eligibility for aid down the line. It might seem scary, but just buckle down and do it, in the end you’ll be thankful that you did.
2. DOn't Assume You Don't Qualify for Aid
If you think you don’t qualify for financial aid, you might be surprised to find you still qualify. When it comes to government financial aid calculations, things like retirement savings, existing college savings, investments, and mortgages don’t necessarily factor into the calculation. Instead, the government looks to your salary and any other college aged children living in your household to decide on aid eligibility. So regardless of your standing, don’t rule out government financial aid though programs like FAFSA.
3. Find the Investment Account That's right for you
There are a few different ways to save for your kids’ education. Looking at your options and the different pros and cons can help your family decide what works best for them!
Educational Savings Account (ESA) aka. Educational IRA
- Pros
- You can save $2,000/ year per kid
- Grows tax-free!
- Educational expense withdrawals are also tax free
- Higher rate of growth than other savings accounts
- Cons
- Must be within income qualifications
- Contributions limited to $2,000/year
- Must be used by beneficiary by age 30
529
Good alternative if you don't meet the income qualifications of an ESA.
- Pros:
- You can choose the funds you put into the account
- High contribution rates (up to $300,000)
- Can change beneficiaries
- No income limits or age restrictions (usually)
- Cons:
- If you change the beneficiary, restrictions can apply
- Can only be used for educational expenses
UTMA/UGMA
- Pros:
- Funds can be used for more than just college expenses
- Funds controlled by a custodian until the child turns a certain age (usually 18 or 21)
- Cons:
- Not solely dedicated to education. Can be used by the beneficiary (once they turn a certain age) for anything they want.
- Account cannot be passed to other beneficiaries
4. Look For Money Everywhere
Funds exist beyond the scholarships your students are offered upon their acceptance into the school, so it’s important to look for scholarships anywhere you can. Merit based and application-based scholarships can be found within the school itself, within the department your child will be studying in, and in different associated groups like the school’s alumni association. Also remember to have your student look off-campus for scholarships. Independent scholarship foundations exist almost everywhere for almost everything, so if your student is a writer, a woman, an athlete, student of color, involved in the arts, a first-generation college student, or anything in between, there’s probably a scholarship out there for them. Don’t be afraid to look to other cities, states, or national organizations.
5. Be Practical
Payment strategies vary from situation to situation but having a general idea of how you’re going to save and pay for your student timing-wise is very important. Don’t let sticker shock scare you. Remember that just because a school advertises a certain price doesn’t mean you’ll be paying that full amount, between savings, scholarships, and financial aid. Some families choose to pay in thirds; one third paid by you for the student, one third paying in student loans, and one third paid in scholarship, while others pay in other variations. Every family is different, make sure you’re prepared to implement your payment strategy when the time comes.
5 College Saving Tips for Students:
1. Apply for Scholarships
There’s quite literally a scholarship out there for everyone, you’ve just got to go and find it! You can apply for scholarships through your university, whether they’re inter-departmental scholarships, general university scholarships, or connected to a club/organization like your school’s alumni association, or outside of your university. There are so many public and private organizations out there that offer scholarships for all sorts of students with varying qualifications. A good tip is to look for scholarships that relate to your hobbies, passions, personal history, or extracurriculars. That poetry club membership might finally pay off!
Also remember, you don’t have to stop applying for scholarships after Freshman year! You can apply for and receive scholarships all the way through senior year, so keep your eyes and ears open for application opportunities and deadlines.
2. Take AP Classes
AP classes aren’t just good for a GPA boost and to make you look good to college admissions boards, they can also help you while you’re in college. AP courses earn you college credit while you’re still in high school, which means you could be getting some of those gen eds or major requirements out of the way before you even start school! The more APs you take in high school, the fewer classes you'll have to take in college… and the less money you’ll have to pay. So, help future you out and get those APs done while you still can!
3. Get a Job
We know you’re busy, but finding a job in college, even something part time or on weekends can make a big difference in the long run. We won’t pretend like it’s going to completely pay for college, but it could help relieve the pressure of smaller expenses like books, groceries, clothes, rent, and utilities… and maybe a fun night out here or there.
4. Take the Bus
Do you really need a car on campus? REALLY? If the answer to that is anything but a definite yes, then it’s time to seriously consider ditching your car for four years. Between gas and insurance, not to mention general and unexpected maintenance, cars can be a huge expense for college students. Consider turning to alternatives like walking or biking to class, taking the bus, and when you really need to, asking your friends for rides.
5. Budget
A new pair of jeans, a trip to Taco Bell, tickets to the football game, these are all small expenses that can add up seriously fast. If you let your spending get out of control on the little things, then you won’t have any money when it comes to the big things, like student loans. Set a monthly budget and stick to it, maybe even try to stay under budget to you can afford those expensive game day tickets when they come around. If you keep yourself inline, you and your parents will be much better off in the future.
A Final Tip for Everyone:
Find the Right School
A good education could be the key your student needs to unlock success in their future career. But it may also be the key to unlocking a massive amount of life-long debt. It’s important for your family to be realistic about the schools you’re looking at. If your student is looking at a $60,000 per year program in an out of state school, when an in-state school offers the same or similar program for only $20,000 a year, it might be time to start re-evaluating your priorities.
Education comes with a price, but it doesn’t have to be the highest price. Don’t let the allure of a glitzy school overshadow the degree, because in (hopefully) four years, the major on their degree will matter much more than the name on their school sweatshirts.
