Saving for college is a tough topic for many families. Every parent wants to see their child succeed and to help them in any way they can. However, many families today are struggling to make ends meet and save for retirement, let alone cover college costs too. It’s a stressful time and a stressful subject for students and parents alike.
Creating a plan to pay for college can be overwhelming; however, with student loan debt now the largest consumer credit debt in the nation, the idea of not saving can be even more so.
There are many factors that go into paying for college and avoiding debt, such as understanding what your intended career will pay and what type of loan payments you’ll be able to afford. However, a key factor in this is how much you actually need to borrow. Saving for college, even a little bit, lessens the debt load you may have to incur and helps you graduate college more independent and free from debt.
There are a number of ways to save for college that enable families to start small and build up, using time to their advantage. The sooner you begin saving, the more likely you are to make saving a habit and create a nice college fund for the future.
Many options are available, from formal college savings plans like 529 plans or Coverdell accounts to a high interest savings account at the bank or even a jar on the kitchen counter labeled “college fund.” Let’s go one by one and review the options.
529 College Savings Plans and Coverdell Accounts
These formal savings plans are tax deductible and provide a relatively steady and reliable growth pattern. Accounts are timed to the age of the student and become more conservative the closer the child gets to college age. Both accounts are investment accounts and dependent upon the stock market, gaining and losing money right along with other investments. Funds from 529 plans are solely for use on college expenses, while Coverdell accounts are slightly more flexible with funds available for education expenses at private elementary, middle or high school, as well as college.
For more information on 529 plans, visit College Savings Iowa.
Find more information on Coverdell Accounts online, or talk to your financial planner.
If you aren’t comfortable with a full-on investment account such as a 529 plan, or you feel too close to college to see the benefits of a long-term investment account, a traditional savings account is a viable option. Many financial institutions have interest-bearing savings accounts. Consider setting up a savings account at your local bank or credit union specifically for college and begin making monthly deposits.
Feed the Pig
Sometimes the easiest way to remember to save is to do it every day at home. Make yourself a piggy bank and get in the habit of feeding the pig with your loose change and spare bills each day. Once you have a good start, transfer it to a bank account and watch it grow even more. Continue collecting in your jar and making bank deposits and you’ll be surprised how fast it can add up.
When it comes to saving for college, every little bit helps. Many costs are associated with college, from tuition and fees, to room and board, to books and personal expenses. Money from a summer job may not seem like enough to pay for tuition, but it would probably cover a good portion of your book expenses.
The most important thing to remember is to save whatever you can, because what you set aside today helps you get that much closer to completing your degree with less debt. And less debt means more freedom to live the life you’ve always dreamed of.
Contributed by: Iowa College Access Network
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