As federal financial aid becomes more and more fragile by the day, and student loans beat people down, it can be scary to be a parent of a younger kid right now. Nobody wants the question of sending their kid to college to be answered by nothing but finances.
These are a few ways you can maximize your child’s chances of getting the amazing higher education they deserve!
Open a Savings Account
Start early and enthusiastically
As Theodore Roosevelt once said, “Believe you can and you’re halfway there.” Typically, the most difficult part of any new project is just starting. It can be daunting looking at a possibly several year long task and telling yourself that you’re going to start, especially when it’s about money, but taking the first step is usually one of the easier parts of the process as soon as you can get through the anxiety of starting.
A great step one in saving for your kids’ college is to open a new savings account. You typically only need between $25 and $100 to open a new savings account. To find out your exact initial deposit requirement, you should call your bank and ask. If you don’t like their answer, you can always open the savings account through another bank. Yes, having bank accounts through separate banks can be a hassle, but now, in the days of online banking, it’s simpler than ever. And for many families, the difference between $25 and $100 can be critical.
Start a budgeting spreadsheet
Everything’s more manageable once you break it down
Modern banking apps are an incredible convenience. They provide us with a quick and dirty way to get an overview of your spending. Unfortunately, many bank apps miss the more comprehensive breakdown of spending that creating a personalized spreadsheet can provide.
The spreadsheet above may look scary, but you can break it down into a few simple parts. You only need:
- A consistent time frame by date
- A budget based on how much
- A smaller section for expenses each day
- Totals for the time spent
First, pick how long your time frame is. The above spreadsheet splits the calendar up by week, but you can bring it down as far as a daily budget and up as far as a yearly budget. Now, based on how much you make, decide how much you want to spend by the week. It’s also important to split your specific budget based on everything you need to spend. It may be good to split money for rent/mortgage, food, utilities, and a rainy day fund. Once you have that complete overview of your budget, you can decide how much you can afford putting into savings.
This spreadsheet also wouldn’t function exactly like yours would have to. I made it as a freshman student in college who didn’t have to buy groceries. All the money in the budget was made up of savings from a summer job and it was mostly spent on graphic novels and dinners out, so this exact construction may not be 100% fiscally reliable, but the core of it stays the same. It helps you track what exactly every purchase you make is and lays it out in front of you, and you don’t have to be an accountant to understand the information there because you input it.
Open a 529
Banks are there to work with you
Now we get into the nitty gritty of finances, because the prospect of saving money shouldn’t scare us. A Qualified Tuition Program, also known as a 529 plan, is a great way to make sure you’re saving enough money over a long period of time.
529 plans allow you to input money each year with a bank and, depending on the bank’s specific 529 plan, the money is strategically and safely invested, so it grows similarly to interest. Then, when you’re ready to take it out, you can do so tax-free or tax-deferred, also depending on your particular plan. Call your bank to ask them how their particular 529 plan works to see if you want to start one through them.
It also doesn’t just apply to tuition. 529 plans can impact your meal plan, room and board, internet access, technology, books, and any other educational expense your child might have.
There are several stipulations to how a 529 plan operates, since it was designed for this purpose, but if you have enough money coming in to justify setting aside more than $2,000 each year for your kid’s college, 529 plans are great for letting your input tuition fund grow tax-free. Knowing how the American tax system works can make or break so much, including your child’s college experience.
Early College Credit
Every child has a prodigy within
One method that can save you money for college later is through early college credit. If your child is in a high enough level of their classes during high school, you should start talking to them and their high school advisor or guidance counselor (guidance counselors are amazing resources for learning strategies that not enough parents take advantage of) about possible options for college credits.
Generally, Advanced Placement (AP), International Baccalaureate (IB), and dual enrollment programs cost significantly less than college credits, often by hundreds to thousands of dollars. AP classes give your child a way to get credit towards their major and general education requirements early, or, with enough credits, graduate college a semester early. The number of credits you get through AP is generally based on how well your child performs on the test at the end. Each of these tests cost just under $100, which is much lower than college credits. One credit at a university usually costs somewhere around $1000, and a good score on an AP test can bypass 3 or 4 college credits. Of course, the numbers from colleges change based on your financial aid needs, but that’s something you can call a university financial aid office and ask about. IB credits work similarly, but are more specialized to the student and aren’t offered by nearly as many high schools.
Dual enrollment is more of the classic college experience, only earlier. It involves taking classes at a local community college while still enrolled in high school, often either in place of another high school class or over the summer. The cost is a bit higher than APs and IBs, but college-level financial aid applies to two-year institutions, so you can get practice learning about the financial aid process and see what you may qualify for later. It’s always good to call the office of financial aid at your local community college to get an overview of your status.
Those are the best ways to start saving for your kid’s college!
The earlier you start along this plan the better, but these are still great practices no matter where you are.
