Saving for College in a Challenging Economy
Fifth Third Bank offers parents practical advice on how to build up your money for your kids' future
With so many families struggling to cover their basic needs right now, the idea of saving for a big-ticket item like college can be daunting. The following tips can help keep the dream of financing a college education in sight while navigating today's economic challenges.
1. No amount is too small. Setting aside $25 or $50 a month doesn't seem like much when the cost for a four-year degree could exceed $100,000. But given time and interest, your savings could amount to a significant sum.
2. Don't wait to start saving. A major regret for many parents who are saving for college is that they didn't start planning soon enough. Experts recommend parents start saving for college shortly after your child's birth.
3. Save for retirement before you save for college. One of the biggest mistakes parents make is using their retirement savings on a child's college education. Remember, there are more options to finance college than there are to pay for retirement.
4. You don't have to save the whole amount. The general rule of paying for college is one-third comes from savings, one-third is from current income, and the final third comes from a combination of student and parent loans. Using that formula can better help you plan your savings goals.
5. Explore tax-free and tax-deferred plans. Similar to retirement savings, there are several tax-advantaged programs for education expenses, including pre-paid tuition or education savings plans. Each has its own advantages and disadvantages, so do your homework to see which is best for your family both today and in the future.
6. Use a separate account for college savings. Don't comingle your college savings with other funds so you can track progress and won't be tempted to spend the savings on other items.
7. Get college credits while in high school. Advanced Placement and College Level Examination Program exams allow students who pass to receive college credit during high school. The cost for these exams is generally a fraction of the cost of taking the equivalent credits in college and may enable students to earn a degree in less time.
8. Start at a community college. For students looking to attend state schools, community colleges offer an inexpensive starting point. For many students, this option allows them to complete their core classes at a discount before transferring to their school of choice to complete their undergraduate degree.
9. Search for scholarships and grants. There's an astonishing amount of small- and medium-sized awards available to students. It takes some work, but careful research can yield significant results. However, be careful to avoid scams or organizations that claim to provide tailored scholarship lists for an unnecessary and hefty fee.
10. Consider serving your country or community. Military service and community service programs are ways in which students can give their time in exchange for tuition.