This post was brought to you by J Women’s Network and Genworth. All opinions are my own.
For most parents, the cost of college looms over them like a big, grey cloud, from the minute they find out they’re having a baby until their kid marches off that stage, diploma in hand. And sometimes, unfortunately, for some families, the financial burden stretches well beyond graduation and it’s not an option to Save For College.
When it comes to planning for the future, I found most of the parents I interviewed were most concerned about saving for college. They wanted to know the best way to get ahead of the curve, so they can fully enjoy their time with their young kids at home, today, and not constantly worry about that tuition bill eight or eighteen years down the road.
1. Pay it down.
Getting rid of high interest debt should be your very top priority. Paying off your credit cards is really the best investment you can make for your child.
First off, recognize that you are not alone. The average American family still has over $6500 dollars in credit card debt.
And the math is simple: getting singe rate returns on any investment, while paying double-digit interest on your cards every month, doesn’t make financial sense for anyone, under any circumstances. So pay off your balances before you start saving for Stanford, and then do your best to keep all of your family’s consumer debt to a minimum.
2. Learn to love three numbers.
Without question, the star of the show here is the 529 college savings plan, and it actually looks a lot like the 401(k) you may already have for retirement. Find more info on Retiring with guaranteed income – for life in this article from Genworth.
Choose from a basket of investment options, contribute money over time, let your funds grow, and then withdraw them federally tax-free when you’re hit with those “qualified college expenses.” (Which is just legal speak for most of the costs that keep you up at night when you picture sending your kid to school.)
Why I love these three numbers: anyone can go online and open a 529 from the comfort of their couch. You can put in as little as twenty-five dollars to start, and up to $65,000, right now, to max out five years worth of contributions. And remember, no amount is insignificant! Don’t pass up the chance to save something just because you don’t have as much as you might like. Think back to when you learned about compound interest— five hundred dollars today can mean a nice chunk of change in fifteen years.
3. Ask for money.
Studies show that Americans spend between $750 and $1000 every year on the holidays. But what if you asked your loved ones to really give the gift of a lifetime: help out with the college fund.
Fifty or a hundred dollars on every birthday or festive occasion might not seem huge now, but think about it over the long-term (especially in that 529). By the time little Henry is packing up the car, his grandparents’ generous gifts might just buy him a year’s worth of textbooks or better yet, his first semester.
4. Live smaller to Save For College.
Last but not least, the best way to Save For College is not to spend. Here’s the thing: when our income rises, most of us want to upgrade. We dream of the bigger house; the fancier car; the longer vacation. Some people call it “lifestyle inflation”— the more we make, the more we seem to buy.
Try asking yourself if you really need the hottest, new handbag or the fastest computer on your cul-de-sac, just because you can technically afford it. Live a little smaller, and you’ll be surprised what a big impact it can have on your bank account, especially when that admissions letter arrives.