Whether you have a teenager in high school, or a toddler that isn’t even in preschool yet, saving for college is probably on your mind. You worry about the cost of tuition, books, living expenses etc. You worry about where they will want to go to school, and if it will be safe. You worry if they will meet the right friends who offer the right kind of encouragement and environment. Let’s face it…you are overwhelmed! To be honest, I can’t help with the type of friends they will meet or whether the college is safe, but I have some ideas on the costs, and have found a website that offers some great tools to set you on the right track.
Where do you start? What should you be doing? Well, the best advice I can give you is to start saving as early as you can. You should be saving for your child’s education as soon as you are out of debt (with the exception of your house, if need be) and have your 3-6 months emergency fund in place. I would prefer that you are contributing to a retirement plan as well, since we don’t want to shortchange you in retirement to fund your child’s college. Now, when I say as soon as you can, those of you with high school aged children shouldn’t panic. You still have time to save, but your saving strategy might have to be more aggressive.
So how much should you save? Well, that amount can vary greatly, since the cost of a state university is significantly less than that of a private college (i.e. Harvard or Princeton). Each child’s monetary needs will be different for their education, and each parents income and timeframe are different for saving. So, it really depends on how much extra you have out of each paycheck and how long you have to save. You should sit down and look at your budget and figure up how much you have left over each month. You might figure out that you want to save for the Harvards and Princetons of the country, but the reality is that it isn’t feasable. I guess what I am trying to say is that you shouldn’t worry about “how much you should save”, but rather focus on saving what you can and put all your energy into getting scholarships and grants to make up the differnce if need be.
We are planning on trying to start a family this year, and we have discussed this situation at length (no one can say we aren’t planners, hehe) and we have agreed that we would make every effort to save enough to cover 4 years of tuition, books and living expenses at an in-state university. If the child wants to go to a more costly private school or an out-of-state university, we will do what we can.
There are many different tools out there to help you in your quest to save for your child’s college expenses. There are websites like ours, that offer advice in many different areas of your financial life, and there are websites that specialize in 1 area of your finances. A great website I found is called Savingforcollege.com It helps you sort out where to put your money and has tools like calculators that can be tailored to your particular situation. For example, if your child is 6 years old, and you need to save for 12 years and then pay for 4 years at a university that costs $ 42,399 (or some other random amount) a year, their calculator can help you figure out what you need to save to get there. It also has a lot of information about the 2 main types of accounts to put your money in: a Coverdell ESA (Education Savings Account) and a 529 savings plan. Both of these plans have advantages and disadvantages, so you should read the information here and here and compare them to see which one suits your needs. Clark Howard’s website is another great place to check out advice on choosing the correct 529 savings plan that works for you, and why you might want one from a different state then the one you live in!
Overall, as parents you have lots of free tools out there to help uncomplicate the process of saving for college. Use the information we have provided here, use the website we talked about earlier and the tools it provides, then look at your budget and see what you can afford. As I said before, the name of this “game” is to start as early as you can. But don’t let the process overwhelm you. Parents have enough to worry about on a day to day basis without getting bogged down in where to put college money. Find someone that is smarter than you on the subject, and get them to help you!
