Education Saving Strategies
Whether your children are still in diapers or getting ready to start middle school, the sooner you start saving for their futures, the more prepared you’ll be when the time comes for them to head off to go to college. Parents go to great lengths to pay for their children’s education, often sacrificing their own financial security. We typically recommend making sure you are on track with saving for retirement before funding for education. Remember, you can borrow for college, but you can’t borrow for retirement. Assuming that you are able to simultaneously fund for retirement and education savings, you can take advantage of various savings options to help cover some or all of those costs. We have compiled some of our best tips to help you start preparing for your child’s college career.
Ask the right questions
Even if you’re in the early stages of a college savings plan, it’s important to ask the right questions up front. Some questions to keep in mind as you start thinking about future education costs are:
- What type of education will my child desire? Will he/she go to a public university or a private university? In state or out of state? While it might be too early to know a definitive answer to these questions, thinking through the options is a great way to familiarize yourself with the cost of different paths.
- Where are we at today? Take an honest look at your current financial situation. Do you have a retirement plan in place? Any savings strategies? Knowing where you’re starting from is just as important as understanding the end goal.
- Will your child contribute to his or her education costs? Going to college is expensive, so it’s important to know up front whether you will be covering the entire cost of college or whether you would like to have your child contribute. Only 30% of families believe that the parents should be solely responsible to pay for education, based on a survey conducted by Sallie Mae. If you plan to have your child contribute, it’s best to start discussing that with them early on.
- Are you willing to take on debt? Deciding up front whether you will take on debt for education is an important decision. There are many options available to both save for college tuition traditionally and pay it back over time. Knowing which options you are comfortable with is an important step in getting ready.
Understand the costs involved
The expense of college does not include only tuition. There are other costs involved such as living expenses, books, extracurricular activities, and miscellaneous expenses. Depending on how many years your kids are away from college, you’ll also want to factor in the real probability of inflation adding to the bottom line.
Once you understand the costs involved, you’ll be better prepared to look at ways to minimize those costs and save money toward tuition. There are ways to pay for your child’s college expenses that don’t involve writing checks. Things like grants, scholarships, financial aid and even work study programs can all help fund your child’s education.
If you could use some help calculating the estimated costs for your child’s education, you may want to try out this basic college savings calculator to get an idea of what to expect.
Invest now for a future tomorrow
Investing in things like music lessons or sports might seem counterintuitive to the parent saving for college, but the reality is that those extracurricular activities can actually set your child up to receive a scholarship when they are applying for college. If you have a child that is musically or athletically talented, consider cultivating that with lessons and memberships now. It just might pay off down the road.
Diversify your options
When you’re saving for college it is best to have diversity in your savings plans and not put all your eggs in just one basket. There are a variety of funds you can set up such as 529 Plans, Roth IRAS, and savings accounts just to name a few. While we will be covering these options in greater detail in a future article, it’s good to know what’s available to you as you start to gather your research.
Reach out to a professional
Whether you have already begun your financial plan, or need help getting started, Tobias Financial Advisors would be happy to help. Please get in touch with us to schedule a consultation and find out how we can help you get the most out of your college savings plan.