Many new parents often wonder when is the best time to start saving for their child’s college education. Every family will have different finances, but here are some tips to make sure you have enough for their college tuition fee when they turn 18.
How To Start Saving For Your College Tuition Fee:
As Soon as Possible
It’s generally good advice to start saving for your child’s future education as soon as you possibly can. Many even suggest getting started on the account before they’re born. In the past decade, tuition and other college expenses have risen by over 50%, making the college fund even more important than ever.
Don’t Overextend Yourself
For some families, it may not be possible to start saving that early. It’s important to also pay attention to your other expenses and family’s needs, like buying a house or keeping an emergency fund. Create a budget and find balance, but try not to neglect anyone savings account.
Don’t Forget About Retirement
For many parents, their children will be heading to college as they’re heading towards retirement age. This presents quite a few problems for parents who didn’t create a retirement fund. Their choices consist of continue working throughout the college years, which may not be entirely feasible especially if you have more than one child, or trying to make it work with social security payments.
It’s a good recommendation to have your retirement fund set up before you save for anything else, just to make sure your whole family is well taken care of when you’re older.
Start With The Baby Shower
As suggested before, before your baby is born is also an ideal time to start saving for their college education. If you’re gifted checks, cash, or bonds at the baby shower, put a good chunk of that straight into the college fund. Other events may happen in your child’s life where bonds are received, like religious events, early birthdays, and other achievements and milestones. These are also great opportunities to invest in their future.
Choosing the Plan
There’s quite a few options when it comes time to save for your child’s college fund. Many choose to go with a regular savings account, due to the ease of use, but it should be set up in your children’s names. However, keep in mind that if you go to apply for financial aid, the savings account could affect their ability to be granted any assistance.
A 529 savings account is another choice you may want to take advantage of. If you set it up before they’re born, you can transfer it to their name as a beneficiary. It can also provide tax benefits. Another route parents go is an IRA, generally for the higher interest rates than the 529 or standard savings accounts can provide.
As a general rule, it’s best to start saving for your child’s college education as soon as possible. However, you should always keep your family’s financial situation and changes in mind. Every parents’ finances will be different, so you have to find what works for you. A better rule would be: start saving as soon as you’re able.
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