Saving money for your child’s future college education is something many parents think about. Like with most savings goals, its best to start as soon as possible. First, you should consider how much you will need to save for college. There are several free college savings calculators on the web, but ultimately you will need to consider the state you live in, how many years you have left to save, the cost of tuition at the college your child would like to attend, what you expect their living expenses to be, how many years they’ll be in school, how much, if any you have saved already, and how much you can reasonably expect to receive in scholarships and grants.
If gathering this information feels challenging or overwhelming, don’t worry, it’s just an estimate and it can be adjusted later once new details become available. Below are a few different accounts to consider, along with a strategy to involve your child on their way to paying for college.
If you want to save additional money for education, or if you exceed the income limit for the Education IRA, a 529 plan may be a better option. Make sure the 529 plan you select gives you the freedom to choose the funds you invest in with the account. With a 529 plan you have the option to change the beneficiary to another person in your family if the intended recipient chooses not to go to college. 529 plans to not have annual contribution limits and there are not income limits or age restrictions for use of the account.
UTMA or UGMA (Uniform Transfer/Gift to Minors Act)
These accounts are designed for more than just education savings. The account gets set up in the child’s name but is controlled by a custodian (like a parent or guardian). The child is eligible to access the account when they turn 21 (or 18 for the UGMA account). The child is allowed to use the account any way they want.
Students who plan to pursue higher education should also be involved in the college saving process. Even though they are students, they can still help to build their funds, or apply for scholarships to help with the task of paying for school. By involving them, it will help them understand the cost of college and hopefully it will establish a healthy understanding of money and savings habits. Here are some great ways for your student to start getting involved in the college saving process:
Get a job
Whether your student works full time during the summer, or part-time during the school year, it will be helpful for them to begin to gain work experience, and a paycheck to put towards college tuition and expenses. Bonus points if the job is related to their desired field of study. For example, if they are interested in becoming a chef, they can apply to wash dishes in a kitchen, or if they’re interested in the medical field, they can apply to help at a local nursing home, which will help them gain industry insights and build their network while working.
Although volunteering doesn’t pay cash, it will help when applying to colleges, and scholarships. The volunteer experience will look good on their application and help them get a leg up on their peers. Their time volunteering will also expand their network and potentially help connect them to other opportunities
Apply for scholarships
Scholarships are free money and there are all different types. There are scholarships for sports, academics, extracurricular activities or even location-based scholarships for members of certain communities. If your child is eligible to apply, they should apply. Any amount of scholarship money can help toward limiting the amount you have to pay out of pocket.
Take Advanced Placement (AP) Classes
Advanced Placement (AP) Classes can count as college credits depending on how well the student does in the class. If your student already has college credits, that’s one less class you will have to pay for when they are enrolled in college.
Open a savings account
By opening a savings account, your student will have a place to begin building their funds. Visit a branch or contact a member of our team today to learn more about our savings account options.
Learn to save money
Chat with your child about saving money. Share your saving philosophy and explain how important it is that they set savings goals. Whether it be for a car when they get their license, or money to contribute toward their college tuition and expenses, it is best to get them involved in the savings process as soon as possible.
Ultimately, saving for college is a process that takes planning and teamwork to accomplish the goal of graduating debt free. The sooner you get started, the better.