Easy Ways to Save Money Every Day for College

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When you have a child who might go to college someday, it’s wise to prepare financially. Each family needs to set their own savings goals and then make a plan for achieving these goals. Because college is a significant expense, it’s wise to start thinking about these goals as early as possible. Saving money each day over many years is the best way to lessen the financial sting of attending college.

Rising Costs of College

In the late 1970s, a year of private college cost just less than $18,000, and public college cost slightly more than $8,000 in today’s dollars. Costs began climbing from that point, and today, college costs are just more than $48,000 per year for private schools and just more than $21,000 for a public college. One of the main reasons for higher college costs is a decrease in state funding for four-year public colleges. Schools have been forced to raise tuition to make up for this shortfall. The rising cost of living is another factor in tuition hikes. Forecasters expect college tuition to continue growing in the future. With steeply rising college costs and mounting student debt, more people are wondering if college is worth it.

Money-Saving Tactics

Saving for college is important for anyone who wants to avoid amassing a substantial education debt. Starting a savings plan early will help avoid some student debt, but even a small amount of savings can be helpful. Parents often need to balance two simultaneous savings goals during their working years: retirement and college for the kids. Everyone needs to set their own goals for saving money, whether it’s to pay for a percentage of kids’ college education or the whole thing. Some financial planners suggest that saving up a third of the costs for a modest four-year education is attainable over an 18-year period. Use college tuition forecasting calculators to help determine realistic saving goals. Teenagers can also help with a savings goal by getting a part-time job and contributing part of their wages. Even watching daily spending can be helpful for working toward this long-term goal. Designate a college fund coin jar and put pocket change in the jar every day. At the end of a year, you may be surprised by how much money has accumulated.

College Savings Plans

A college savings plan, typically called a 529 plan, is a special savings account that families use to pay for higher education expenses. These tax-advantaged accounts are sponsored by educational institutions, state agencies, and state governments, and the IRS authorizes them. A prepaid tuition 529 plan allows account-holders to buy credits at participating colleges that will cover tuition for a future student. State governments usually sponsor these plans, and there are residency rules that must be followed. Check for guarantees on these plans; if a sponsor has a financial shortfall, account-holders may lose invested money. Education savings plans enable savers to open an investment account to save for a future college education. Savers can choose from different investment options, such as mutual funds. Students can withdraw from the education savings account to pay for qualified expenses at any college or university.

Financial Aid

Financial aid includes any type of financial assistance designed to pay for educational expenses such as tuition, room and board, transportation, and books and supplies. Financial aid includes grants, loans, scholarships, and work-study programs. Grants and scholarships are free money to be used for college; students don’t have to pay these funds back. Scholarships are merit-based awards, and grants are given based on financial need. Work-study programs involve students working to pay for a portion of their college expenses. Loans can be used for college costs, and loans may be funded by private lenders, state governments, or the federal government. Students must repay loans, so loans are best used as a last resort after exhausting all other funding options.

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