What You Can Do to Save for College

While we can all hope for the easy fix, saving for college often comes with a lot of sacrifice and certainly a lot of planning. While tuition costs keep rising, there are very specific things that parents (and students) can be doing to help save for college and lessen the financial burden all around. From the experts, here are some everyday practical tips on what you can do to save for college.

1. Start by saving early and often. The best advice is to start saving the day the baby is born, if not earlier, and save as often as you can. The reality of interest is that the sooner you start, the more you can take advantage of compounding to watch your savings grow. By being diligent with this, it will also help you get into the habit of saving.
2. Work on saving as much as you can. If you don’t think you can afford to save, just start with a small amount. You will find that as you adjust your spending habits, you can gradually increase the amount you save. Don’t worry too much about starting small if that is all you can afford since the compounding of interest over time will help your savings grow. The first step is to make a habit of saving.
3. Be sure to save regularly. Rather than save larger amounts of money at random intervals, try to save a little every month. The more frequently you can save the better, but at the very least, try and save once a year. If you can save with the same frequency as you receive your paycheck, whether weekly, biweekly or monthly, you will find it easier to get into the habit of saving.
4. Try to make saving automatic. If you can, sign up for payroll deduction, or ask your bank to automatically move money from your checking account to your savings account every month. Many of the state section 529 plans have options where you can have money transferred from your checking account every month. If the money isn’t in your checking account where you can easily access it, you’ll be much less likely to spend it.
5. Be sure to earmark those savings for college. Use a special account designated for college, but be sure to put it in the parents’ name, not the child’s. This will help you save, and provide a motivation as well.
6. Try to establish a dollar goal. If you specify a savings goal, you’ll be able to measure your progress toward that goal which will be encouraging when you may want to divert the money elsewhere.
7. Experts recommend investing windfalls rather than spending them. If you should get a windfall, such as an inheritance, winning the lottery, a large income tax refund, or a bonus at work, put it immediately in the college savings fund. This may help immensely toward achieving your goal.

8. Try to increase the amount you save each year. Experts recommend trying to increase the total amount you save each year by at least 5%. For example, if you save $100 a month this year, you should save at least $105 a month next year. This will help your savings keep up with the college tuition inflation rate. Also when you get a raise, increase the amount of money you save.
9. If you can, ask relatives to help. Set up a section 529 plan, and ask friends and relatives (especially the grandparents) to contribute money to the plan. Studies show that 60% of grandparents say that they would contribute to a section 529 plan if asked, especially since they know the money will be spent on the child’s education.
10. Consider redirecting old regular payments towards the savings goal. Whenever you have a regular payment that stops (i.e. you have paid off), try shifting the money you were previously paying into college savings. Since you were already used to spending that amount, saving it should be relatively painless and easy. For example, when your children enter kindergarten, redirect the money you were previously spending on daycare to college savings.
11. You may be able to find money to save by reviewing your living expenses. Create a monthly budget that reflects your actual spending habits, and try to identify living expenses you can cut. Any time you can cut your expenses, redirect the money toward savings.
12. And finally, before you start to save for your child’s college education, get the rest of your finances into good shape. Pay off your credit card balances and maintain a cash reserve that is equal to six months salary as a cushion against job loss. Be sure to save for your retirement as well, and if you can, max out your employer’s matching contribution.