The cost of tuition has risen sky-high in recent years with no end in sight. However, saving for college does not have to be painful for students or their parents. In fact, taking a few simple steps can significantly reduce the need for student loans and even eliminate them entirely. And in an age where most students graduate college with over $20,000 of debt, the knowledge of how to save money for college is more important than ever. Here are five tips for students and their parents:
1) Set goals. This is the most important tip when it comes to saving money for college. Without a clear goal in mind, it will be difficult to plan how best to accomplish it. First parents should decide how much tuition will cost when their son or daughter goes to college, adjusting for inflation of course. This will give parents a better idea of how much they need to save each year in order to reach their goal. Parents can also simply decide to save a large sum by setting aside a percentage of their income.
2) Start saving now. College costs are high, and they are only going to get more expensive in the coming years. That is why parents and students should start saving as soon as possible. Even if the child is still a baby, it is a good idea to plan ahead and set up a college fund. Starting very early will also allow parents to take advantage of compounding interest. Governments often offer tax free ways to do this such as 529 savings plans that everyone should take advantage of.
3) Adjust spending. There is no reason to make drastic cuts in spending for the next 18 years in order to save for a child’s college education. In fact, making a few small cuts here and there can result in significant savings over the course of a year, let alone over 18 years. Even cutting out those five dollar coffees and making it at home instead can really add up. Nothing is more precious than a child and a good education may be the best thing possible for that child.
4) Set up automatic deposits. Another great way to save for college is to set up automatic deposits Many banks offer this option, and it allows customers to automatically transfer money from their checking account into a savings account. Best of all, customers do not have to lift a finger and over time, they will become so used to this that they will not even miss the money. Besides, if the money is not in the checking account, then there will be no temptation to spend it!
5) Spend wisely. It may be tempting to splurge whenever a debt is finally paid off, because now all of that money is freed up each month. However, the smart choice is to start transferring that money over to the college fund instead. Why? Because that money was already being used for bills anyway, so it will not be missed in the first place.
