Saving for College Tips
Make your money work. The sooner you start saving the more time
your money will have to grow! It is less expensive to save for college than to borrow
for it...when you save, the money earns interest, when you borrow, you're paying
the interest. So, let the money do the work!
Establish a savings goal. Project the cost of tuition by the time
your child will start college (without falling off your chair!) and allocate a fixed
percentage of income towards it. Don't try to save for the entire costs - use the
one-third rule (one-third from current income, grants, and scholarship; one-third
from loans; and one-third from savings).
It's all in a name. Save in your name not your child's. This will
minimize the impact of the savings fund when determining need-based financial aid.
Account for College. It helps to open a separate savings account
just for college. It will motivate you to save as you begin to see the account grow.
Remember be disciplined, this is for your child's education, keep the money in the
account until that first tuition bill arrives!
Automation is key. Sign up for payroll deduction or ask your bank
to automatically move money from your checking account to your designated college
fund account every month.
Get financially fit. Pay off credit card balances and be smart
about how and when you use them.
Be wise about windfalls. If you receive extra money such as a large
income tax refund, a bonus from work or an inheritance, put it in the college savings
The 411 on the 529. The 529 Savings Plans are tax advantage plans
that allow your money to grow in a tax-deferred fashion, and qualified withdrawals
are exempt from Federal income tax. Many states will also exempt state taxes for
529 plans. Family and close friends can also sign up to contribute to 529 plans.
It pays to be loyal. Take advantage of loyalty programs that help
you earn money to pay for college. These programs provide rebates to the consumer
in exchange for buying certain brands, or shopping at a particular retailer. Typically,
these programs provide a reward in the form of credits to a 529 plan.