When to Start Saving for College

posted on May 28, 2014 at 3:41 am

For some of us the thought of being able to afford to send one of our kids to college, let alone several children, is a very daunting one. Some of us have started saving, others have not at all. No matter how old your child is the answer to when you should start saving for college is NOW! Even a small savings of just $200 per month for 18 years will leave you with $48,000, assuming an 8% average annual return. Since some of us aren’t organized enough to have started saving the day our child was born there are many great online calculators like this one from calcxml.com which help you figure out how much monthly savings you will need based on your child’s current age.

college tuition
via blog.aarp.org

CNN.com offers the following advice on saving for tuition and some of the benefits of college loans and grants:

1. You are more important than your kids.

college retirement
via theheavypurse.com


Translation: Saving for your retirement should be your priority over saving for your kid’s college fund. The reality is your children will have more sources of money for college than you will have for your golden years, so CNN recommends not sacrificing your retirement savings for tuition.

2. Play the market.

via glogster.com

Stocks are best for a college savings portfolio. With tuition costs rising faster than inflation, a portfolio tilted towards stocks is the best way to build enough savings in the long term. As your child approaches college age, you can make your investments a bit more safe by switching more money into bonds and cash.

3. You don’t have to save the entire cost of four years of college.

student loan application form
via abcnews.com

Federal, state, and private grants and loans can bridge the gap between your savings and tuition bills, even if you think you make too much to qualify.

4. Keep it simple with mutual funds.

mutual funds
via myuniverse.co.in

Let’s face it, most of us aren’t financial geniuses. The experts say that investing in mutual funds puts a professional in charge of your savings so that you don’t have to watch the markets daily. This will help you relax and know that your money is working for you.

5. Go for a 529 savings plan.

529 savings plan
via forbes.com

529 savings plans are a good way to save for college and they offer great tax breaks. Qualified withdrawals are now free of federal tax and most plans let you save in excess of $200,000 per beneficiary. Plus, there are no income limitations or age restrictions, which means you can start a 529 no matter how much you make or how old your beneficiary is.

7. Tax breaks rock.

tax credit
via turbotax.com

Tax breaks are almost as good as grants. You may be able to take two federal tax credits – the American Opportunity Tax Credit and Lifetime Learning Credit – in the years you pay tuition. Ask your tax professional what breaks you might qualify for.

8. It’s O.K. if your credit isn’t perfect.

credit cartoon
via irishsideofthemoon.blogspot.com (originally from baloocartoons.com)

The approval process for college loans is more lenient than for other loans. This is good news for some of you with less than stealer credit. Plus, late payments on your credit record aren’t automatic grounds for refusal of a college loan.

9. Flexible payback.

paying back student loans
via readmychickenscratch.com

Lenders can be flexible when it’s time to pay back your loans. Most college loans have numerous programs for repayment that accommodate any situation making them really the easiest of all debts to pay off.


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