by Chelsea Springli 
We know that college educations are important, but are we really prepared to help our kids (or future kids) pay for college? With the costs of college tuition rising each year, it’s imperative that we have a game plan for saving for our kid’s education. Every dollar saved for college is one less that your child will have to borrow which means less student debt and less stress for your child down the road!
Here are a few tips for parents to help save for their child’s education.
It’s Never Too Early to Start Saving for Your Child’s Education
Small contributions add up over time. For example, if a family starts setting aside $50 a month when their child is born, by the time the kid is 18, he or she could have $10,800. Talk to Alltru Credit Union about getting a Coverdell Education IRA so your child’s account balance can grow interest. The earlier you start saving in an account that grows interest, the longer it has to grow before your child needs it.
If there’s no room for monthly deposits in your budget, just try to contribute whenever you can. Here are some one-off events when you can make a deposit.
- Birthdays
- Holidays
- Work bonus
- Tips from jobs
- Tax refund
Remember, the more you save early on, the larger the return will be.
Keep Some Savings in Your Name
You might think it makes sense to open a college savings account in your child’s name, but be cautious that this could compromise their financial aid. Money in your child’s checking or savings account is considered a student asset, which is assessed at a higher rate in federal aid calculations. Up to 20% of the account balance could reduce the financial aid your child is eligible to receive. On the other hand, parent-owned accounts are assessed much more lightly, usually around 5.6%. This means the same amount of money can affect financial aid far less if it’s in a parent’s name. Even small changes, like keeping funds in your name rather than your child’s, can help maximize grants, scholarships, and low-interest loans. Planning ahead and understanding these rules can give your family a clear advantage when it comes to securing the financial aid your child needs to pay for their education later.
Don’t Feel Guilty for Not Saving Enough
Even parents with the best intentions can get off track from their monthly budget of savings. Don’t feel guilty, remember you are only human and just take it one step at a time. While saving for your child’s education is important, so is paying for your short-term needs and other long-term goals. Life happens and you may need those extra funds for something else. If you’re like me and forget to transfer funds sometimes, you can use the “set it and forget it” method and set up automatic deposits so that you can reach your goals without any extra effort each month.
Saving for your child’s college fund indefinitely can be tough. Try setting annual goals for how much you want to contribute to the savings account. This way, you can save in a way that allows you to meet your other needs and future plans. Resetting your goal annually will allow you to adjust to your current income and expenses too.
Start Planning Now
Do your research and look for the best saving options for your family. Whether you start saving when your child is 6 years old or 16 years old, every contribution will help your child in the future. When you’re ready to open an account, Alltru Credit Union is here to help.
