September is National College Savings Month, and when you think about how much college tuition costs, it is no wonder that many scramble, trying to figure out how to pay. And, while a college degree is not always necessary to find success in this world, many people decide that university is the path they wish to take. If college is in your children’s future, it is a good idea to start figuring out ways to save up. After all, it is in the best interests of everyone involved to avoid student loan debt as much as possible.
Tips to Help You Save for College
If you aren’t yet saving for college, now would be a good time to start. Here are 3 strategies that can help you save for college:
1. Contribute to a College Savings Plan
One of the best things you can do is to contribute to a college savings plan. Coverdell accounts and 529 plans both represent opportunities for you to grow your money faster, since these accounts are places for investments (many people choose some type of fund for their college savings accounts). These accounts come with tax advantages as well: You do not have to pay federal taxes on the earnings or the withdrawals — provided the money is used for qualified education expenses.
You can contribute regularly to a college savings plan, and have your kids contribute for their own benefit as well. If you start early enough, you will be able to take advantage of a longer period of time for the money to grow, with compound interest working on your behalf. Last year, I opened a 529 plan for my son, and have automatic contributions made. It’s not a great deal of money each month (I’m concentrating more on retirement savings), but it should be helpful later. And my son can begin contributing some of his own money, too.
It is important to remember, though, that these types of accounts come with risks; since they hold investments, it is possible to lose money in them — especially over the short term.
2. Work Toward Scholarships
Growing up, my parents made it clear that I was responsible for my college tuition. They would pay my housing expenses, and pay for a meal plan, but I had to cover my tuition. As a result, I did what I needed to do in high school to get a full tuition scholarship.
Working toward scholarships can be a good way to save on college costs. Don’t forget that there are scholarships beyond straight academic awards. Check into foundations, local organizations and on the web for scholarships that you might be able to apply for. It’s worth your while to apply for whatever is out there.
3. Regular Savings Programs
Don’t forget that there are plenty of regular savings programs as well. You can sign up for SmartyPig or some other high yield savings account. There are programs like Upromise that can help you save up for college. We’ve got a Upromise account in my son’s name, and every time we shop online or buy airline tickets, we go through the Upromise site. We also registered our debit card and got a Upromise credit card. We use the card for specific purchases, and pay it off every month. No, our earnings from Upromise won’t pay the college tuition bill. But, by the time my son does go to college, the earnings will probably be enough to pay for his books.
Bottom line: If you plan to send your children college, you really do have to begin planning ahead. College is such a major life expense that, like retirement or purchasing a home, you really do need to create a plan, and begin working to save up for college now.