We all want the best for our children. However, getting an education these days can be very expensive, and it’s not something that all families can afford. The best thing to do is plan ahead. The sooner you start putting money away for your child’s future, the better. With that in mind, read on to discover some top tips to help you get started.
- Prioritize your finances – You can’t end the world for college savings, and the rest of your financial needs certainly won’t go away either. Don’t let debt mount up while you try to put money away for your kid’s future. Instead, you need to pay off any debt, for example, any credit cards or other high-interest debt. Establish an emergency fund for yourself and make sure you save for your retirement too. You can’t neglect all of your other financial responsibilities.
- Set your saving goals – You need to create a game plan, and make sure it is a realistic one. Get to grips with your finances and determine how much money you can put away every month. Give yourself a cushion, as unexpected expenses always crop up from time to time. By putting realistic goals in place, you will be able to stay on track. If you give yourself a mountain to climb, you will only become demotivated.
- Encourage your child to work hard in high school – Keep your child motivated during high school and encourage them to work hard. The better grades your child has, the better chance they have of achieving a scholarship. Of course, you shouldn’t put pressure on your child and make them feel like they need to get a scholarship. However, if you can keep them on the right track and make sure they work hard, they may qualify for a scholarship that can ensure their tuition fees are covered.
- Automate your savings – One of the easiest ways to start saving is to automate the process. There are many different tools and software options that you can use to achieve this. If you have an account with the Bank of America, you can also enrol in their Keep the Change program. This means that your purchases are rounded up and the extra amount is added to your savings account. Other banks offer similar programs.
- Find more ways to save – Now would be a good time to evaluate your spending habits to see if there is anything that you can cut out so that you can boost your savings. This may seem like a small solution, however, everything adds up over time.
- Keep big account balances in your name – According to Bankrate, a student will not lose any financial assistance if they have less than $3,000 in a savings or checking account. However, if there is more than $3,000 in the account, 20 cents will be subtracted for every dollar. So, if the account starts to generate some serious cash, you should leave it in your name. Simply keep a savings account for birthday checks and alike.
- Start early – As mentioned in the introduction, saving early is one of the best things you can do when it comes to your child’s education. According to Finaid.org, if you save a mere $50 per month from the day your child is born, you could have $20,000 saved by the time he or she turns 17, assuming you make a seven percent return on your investment. It is never too late or too early to start saving for your children’s future.
- Plan strategically – You can lower the costs of education if you are strategic. For example, if you have children of a similar age, it would cost a small fortune to put them through college at the same time. Why not discuss the option of a gap year after college so that there is no overlap? Another option to consider is doing a study abroad. Of course, this depends on your child, and it is good to go over what study abroad means, but it is something worth bringing up with them. While student visa rules and costs vary from country to country, a lot offer equivalent degrees at a much cheaper price. Plus, it will look great on your child’s CV if they have furthered their education overseas.
- Continue to evaluate your plan – As the years go on, your circumstances are going to change. This is why it is so important to evaluate your plan to make sure that it is still relevant. What was a good plan last year may not longer be a good plan this year.
- Talk to a financial advisor – A lot of people are hesitant to hire a financial advisor because they don’t want to spend money when they are supposed to be saving it. This is a logical approach. However, while a financial advisor may cost more in the beginning, you will save a lot more money in the long run. Research indicates that people generally do better when they make use of a financial advisor.
- Include your child – It is important to include your child in the process. It is important for children to be taught the value of money. They also need to see how vital it is to plan for eventualities in life. This is why it is wise to involve them in the finances and show them what you are doing.
- Don’t put too much pressure on yourself – While every parent would love to put all of his or her children through further education, it is not always possible. Don’t be hard on yourself. It’s certainly not for a lack of trying, and merely contributing in some manner will be a massive help.
- Growth assets – It is one thing to put money in the bank, but you need to make more money from this money. You cannot simply leave it sitting there. You may rely on interest rates, however, they do not realise the type of growth that such a saving plan requires. Instead, you can work with your financial advisor to determine the different types of investments you should be making the most of in order to make your money go further.
- Invest consistently – Choose a specific amount and make sure to invest that amount every month. Then, once or twice per annum, raise the deposited amount by a small amount each month. If you increase the deposits in small increments, it will add up substantially without you noticing it in your monthly spending. This will make it a lot easier for you to see some significant results.
- Family resources – Encourage godparents, grandparents, and other family members to contribute to the plan. Of course, you cannot demand them to give you money. But you could tell them that the best legacy they can offer their children is a contribution to their education, and so adding to the savings plan instead of buying presents and alike will be welcomed.
- Consider the 2K rule – Last but not least, one approach you can use is the 2K rule. If you haven’t heard about this rule before, it was something suggested by Fidelity. It involves multiplying your child’s age by $2,000 to determine how much money you should save.
Hopefully, you now have plenty of tips to help you get started with saving for your child’s future. The only thing you need to do now is put your plan into motion. Begin assessing your finances today to determine how much you can comfortably save. Once you have done this, start putting some money away and make sure you keep your kids involved in the process.