by Emily Hechler 
Congratulations! You’ve been accepted to your dream college! How do you plan to pay for your tuition and other expenses? While this is not the most exciting conversation to have about your upcoming college experience, it’s a reality every college student must face. A better question might be, “How do you plan to save for college?” Whether you’re a parent wanting to help your child financially or a young adult anticipating the start of the semester, saving for college expenses is a must. By proactively planning, you can give yourself more time to save, estimate your expenses, and owe less interest from loans.
Saving as Parents
If you are a parent who wants to help cover your child’s college costs, here are some tips to help.
Start Saving Now
First, know that it’s never too early to start saving. If you set aside even $100 a month when your child is born, that money will have the chance to grow for years. The more you can save for college early on, the larger your return. If you consistently save the same amount, setting the money aside will become part of your lifestyle. With any type of healthy budgeting, your life shouldn’t revolve around saving money for the future if your current needs aren’t being met. But like any habit, it becomes like second nature over time. Working the $100 a month into your budget and sticking with it will be common practice. If you can’t do $100 a month, start will a smaller amount and increase the contribution when you can.
Keep Some of the Savings Under the Parents’ Names
A tip to keep in mind that that when your child applies for need-based financial aid in the future, they will be eligible for less aid than if the money was under their parents’ names. Keeping the student’s money under the parents’ names can qualify the student for more financial aid because parent-owned accounts are assessed more lightly than the student’s own accounts.
When the student starts earning money through a part-time or full-time job, the money should be kept in their own account. This avoids confusion and problems when filing for taxes.
Maximize One-Off Earnings
Parents can maximize the random or one-off earnings. This is a great way to set aside some cash a few times a year without needing to make a sacrifice in your everyday life. Parents can save for their child’s college from other opportunities that come with extra cash, such as bonuses from work, overtime pay, tips, birthdays, holidays, and inheritances without necessarily feeling the loss.
Open a Coverdell Education IRA
When savings for a child’s education, High Yield Online Savings accounts, Certificates of Deposit, and other savings accounts have their pros and cons depending on goals and strategies. A great saving option is a Coverdell Education IRA. This account allows contributions up to $2,000 per year tax free! When opening this account, the child is set up as the beneficiary. Parents can contribute until their child turns 18. Then, the student can withdraw until they are 30 years old. They can use the funds on high school or college expenses.
As parents, helping your high school students save money, even if they don’t need it for college, will still benefit them in the future.
Saving as a High School Grad
High school grads, if you’re still unsure about whether you want to attend college next year, learning financial management tips still has great value for your next step in life. According to the U.S. Bureau of Labor Statistics, over 42% of college students have a job. As soon as you get any time or regular paycheck, you can use your money strategically to improve your present and future financial life.
Learn to Budget
Creating a budget will help you get a realistic look at your finances, and possibly a reality check if you currently don’t manage your finances well. Even if you don’t have a lot of expenses yet, following a budget now will prepare you for when more expenses come your way. Rent, car expenses, cell phone bills, and fun money add up quickly if you don’t keep an eye on how much you spend. If you don’t know how to make a budget, check out our Budgeting for College Students blog.
Improve Your Credit History
Another key element to financial management for high school grads is building your credit score. Making your car payment and rent will help you establish and increase your credit score. Opening a credit card is another option. I recommend that you have your budget in place before getting a credit card. If you don’t, you can easily overspend and end up in a pile of debt. After you create your budget, keep your spending to under 30% of the credit card’s total limit. This makes it easier to pay your balance in full and improve your credit score.
Automate Your Saving
Automatic saving is a great way to save for college or other future expenses without feeling the consequences of less money to spend. With mobile and online banking, you can set a portion of your paycheck to automatically transfer to your savings account instead of staying in your checking account. To want to spend these savings, you’ll have to pause and move money out of your savings account into your spending account, which will give you another opportunity to consider whether it’s worth it.
If you are a frequent shopper, a RollUp Savings account from Alltru can help you save effortlessly. Every time you make a purchase, we’ll round your total up to the next dollar. Instead of spending that extra amount, the money will automatically transfer to your RollUp Savings account. With both this special savings account and a High-Yield Online Savings account, the money that sits in the account will grow interest. With Alltru, you’ll be rewarded with savings while you’re spending.
Begin Investing
As an 18-year-old, investing probably hasn’t crossed your mind. The earlier you start saving for your long-term future, the more time your money has to work for you. A good rule of thumb is to invest at least 10% of your income into a long-term savings plan, like a 401(k). Many employers that offer 401(k) plans offer a match up to a certain percentage. This means that if you contribute 5%, they may also contribute 5% to your plan.
Tip: Some employers will take their money out of your plan if you leave the company before you are vested. I learned this the hard way and lost about 80% of my retirement savings at a previous job. Fortunately, I was only 24 so I have several years to keep saving.
Financially Prepping for Your Future
If you’ve decided college is the next right step, you probably know by now that going to college is expensive. Taking the right actions to prep for your college experience will help you survive your first year both personally and financially.
Open Your Own Accounts
If you don’t already have your own checking and savings accounts, you can open accounts for free at Alltru. Opening your own accounts allows you to manage your money wherever you are with online and mobile banking. All our checking accounts come with a free checking account so you can make online and cash-free purchases. Plus, if you have a part-time job while in college, the money can be directly deposited into the account instead of being cashed out at a branch.
Monitor Your Savings
If you’re living in a dorm or renting an apartment rather than living with your parents, you’ll find that living expenses quickly add up. After you open a checking account, you’ll be eligible to open a High Yield Online Savings account. Saving money in this type of account will grow your funds quickly because of our competitive interest rate. Whenever you have margin in your budget, move money into this account. If your parents opened a Coverdell Education IRA for you, this may be your time to use it. However, the money in the account doesn’t need to be withdrawn until age 30. Use a savings calculator to determine how much more money you’ll have in your account if you wait a little longer to withdraw.
File the FAFSA
A common way to pay for the remaining expenses is through a student loan. However, the more money you borrow, the more money you’ll have to pay back. Student loans must be paid back with interest too. Be cautious about how much you borrow. Consider using your savings and paycheck to pay for your expenses first. Complete the Free Application for Federal Student Aid, or FAFSA, to apply for scholarships and federal student loans.
Saving for College is Possible
While college is an expensive investment, the friendships, experience, and knowledge you’ll gain along the way will be worth it. With these tips in mind, saving for college doesn’t have to be intimidating. Making the right money moves now will help make your expenses easier to manage. Whatever your next step is, Alltru can help you get the right resources in your hands.
