Parents are finding that it's more difficult to save for college today, than it was for their parents' generation.1 The reality is, families are facing a different set of obstacles that are preventing them from saving enough for their child's college education.
Sallie Mae's, How America Saves for College 2018 study, found that while families believe college is an investment in their children's future, just over half are saving for college. However, the amount of money they are saving for college is more than what was reported for the year prior. According to the study, 52 percent of parents cited that not having the extra money was primary reason why they are unable to save for college. If you're in this category, then it's probably time to create a budget strategy for finding the money you need to start saving for college - today.
Here are five tips you can use to help get your college savings budget up and running. Remember, every little bit helps and the sooner you start, the better.
Tip 1: Consider the latte factorThis concept centers on the fact that by making your own coffee from home, you can save a lot of money vs. buying a latte drink from a popular coffee shop. However, it can certainly apply to other things as well. The point is, there are many things you can do to find the money if you stop and think about them. For example, try taking a sack lunch to work or carpool.
Tip 2: Use tax-advantaged plans
College savings plans such as 529s or Coverdell education savings accounts can give you tax breaks so that you can save for college simply by having your money work a little smarter for you. Read more about these college savings plan as well as others in the Protective Learning Center.
NOTE: As of 2018, the IRS has amended the term “qualified higher education expense” to include a limited amount of annual expenses from a 529 Plan for tuition at an elementary or secondary public, private, or religious school. Source: www.irs.gov/newsroom/529-plans-questions-and-answers.
Tip 3: Stash away money as you get it.Don't wait to bank that extra $20.00 you shaved off of your budget last month. If you let it stick around until it turns into a larger sum, you may end up spending it. Instead, get in the habit of depositing smaller amounts of cash rather than a larger sum every month.
Tip 4: Make saving automaticOnce you have your new budget nailed down, set up an automatic contribution every month. For example, if you saved $50.00 off your monthly budget, then set up your contribution to the college savings plan of your choice to come out of your checking or savings account automatically.
Tip 5: Get the whole family involved
For specific milestones or events (such as a birthdays, graduations, or rewards for good grades) ask family members to contribute to your child's college fund in lieu of other gifts. In fact, there are websites that are already set up to allow relatives to easily contribute directly to a child's college savings account. Read more about these websites and making contributions to college 529 plans here.