It is common knowledge that college is expensive but there is hope! By saving for your child’s college right now and taking advantage of scholarships and financial aid, you and your child can get through college in solid financial shape.
You can save for your child’s college at any age. Even if they are already in high school, start making it a priority to save for college and get them involved in the process as well. This is their education we are talking about.
Here is a college savings plan guide to help get your started no matter where you are on the journey.
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How to Save for your Child’s College at Any Age
Save as Soon as Possible
Keep in mind that you don’t have to have all four years of college saved up for by the time your child is a high school senior. Most people pay for college with a combination of savings, cash flow, scholarships/financial aid, and student loans.
If you have 10 years or more to start saving, you want to start putting money into a low fee index fund like a 529 plan. Savings will grow tax free for educational expenses. For financial aid purposes, make sure to put the 529 plan in the parent’s name, not a grandparent. Have the child be the beneficiary.
If you only have four years or less to start saving, put as much money as you can into a high yield savings account.
Get the Kids Involved as Soon as Possible
Let your child know that they can start saving for their college, too. Make it a rule that 25% of each financial gift for birthdays or holidays or babysitting job will go into a savings account for their college.
This is really important when they are old enough to start working summer or after school jobs. By the time they are ready to head off for school, they may have enough saved up to pay for room and board and textbooks for their first year.
By working hard for that money, they will also have a better appreciation for their college education.
Once they are a junior or senior in college, see if they can start taking AP classes. By taking Advanced Placement classes, they can earn college credit and won’t have to pay for those classes in college!
College Savings Plan
Be Realistic About How Much You Will Need to Pay for College
You can get a good idea about how much you will be expected to pay out of pocket for your child’s freshman year by using this free EFC calculator. It will take into consideration your income, how many kids you have in college, and what financial aid they may be eligible for.
Also, do some research about the college your child is starting to be interested in. Look at private vs. public colleges. Don’t focus on the sticker price. A lot of private colleges will offer discounts for students that want to enroll.
You can search the school’s website to see what the typical family pays after grants and scholarships. It may be cheaper to attend a private college when all of that is taken into account.
Fill Out ALL the Aid Forms
Start looking for scholarships before your child is even in high school. By having a good idea about what is available, they won’t be scrambling to apply for everything their senior year. Cappex.com has a free database of scholarships to help get you started.
Don’t assume that you won’t qualify for aid. All students can at least get federal loans. You have to submit the FAFSA to be eligible.
Fill out all the aid forms regardless of your income because you never know what the future will hold. You could be laid off work or get sick or divorced. Many schools won’t consider you for aid later if you don’t fill out the form that first year.
Set Borrowing Limits
If you don’t have enough in savings and cash flow to pay for college, federal student loans are a great option. Choose a federal loan over private loan because they have a fixed rate and have more flexible repayment options.
Have your child take out the loan themselves, and not put it in your name. Student loans typically have a lower interest rate compared to loans parents would have to take out.
You can still help them pay down the loan amount over time but you will have a lower interest rate and they will ultimately be responsible to pay it off.
It is a smart idea to start paying off the loan before your child graduates college to help keep the interest from accruing over time. Even if it is just $50 a month, that is interest that you won’t be paying on that $50.
When it comes to taking out loans, make sure you are not taking out more than a year’s worth of income over the entire four years of college.
Lower Costs Where you Can
Take note of all of the ways you can lower the cost of college. Have your child take AP classes to get college credit. You can even opt to take the first 1 or 2 years of school at a community or technical college to save a ton of money. You can then transfer to a four year college to finish your bachelor’s degree.
Look into how much off campus housing will be vs. living on campus. By renting a house close to campus with 3 other roommates, I spent a fraction or what I would have spent living in a tiny dorm room.
Your child can also work part time to help cover the costs of textbooks, food, rent, etc. This is the time they really need to be independent and earn their own way. This will free you up to put some money toward paying for their tuition.
These are just a few options you can use to save for your child’s college at any age. No matter if they are 5 or 15, you can start saving what you can to put everyone in a much better financial situation down the road.