6 Tips for Saving for College
If you’re a parent, a grandparent, or a student yourself, the idea of saving for college may keep you up at night, and rightfully so. The total student loan debt in the U.S. now exceeds $1.7 trillion, and that isn’t just a bad nightmare. It’s reality for many who choose to earn a college degree and it’s not getting less expensive anytime soon. For the 2020-2021 school year, the average cost of attending a private college rose to $37,650. If you’re trying to figure out how to save that kind of money, you aren’t alone. Here are a few tips for saving for college.
Open a Savings Account
This is great advice for young people looking to put away their own money for college. Opening a savings account is a more restrictive option than just a checking account, which is a good thing. Putting money in savings makes it one step more difficult to withdraw, so you’ll be less likely to want to take it out in the first place. Think of it as the new-age version of an old-school piggy bank.
Start saving early. The day you feel your child can earn money is the day they should open a savings account. And we’re not talking about earning a lot of money. Whether it’s a few bucks they’ve earned here or there, or even birthday money, when they start receiving monetary gifts, they’re old enough to have a savings account. Learning to save while young will improve their financial literacy and help them in the future.
Apply for Scholarships
Everyone likes free money, so why not try to earn some that you won’t have to pay back. Many people aren’t aware that there are scholarships for students even at an early age. They aren’t just for college-bound high schoolers. You can begin making college more affordable by applying for scholarships even as early as junior high. They aren’t only for academic achievements either. Are your kids in sports? Extra-curricular activities? They should try to get rewarded for it. You’d be surprised how many options there are for so many activities your kids may be participating in.
Take AP Classes
This one’s for the kids, not mom and dad. Taking Advanced Placement (AP) classes in high school gives students an opportunity to earn college credit before ever stepping foot on campus. It’s also cheaper than taking courses at a community college. The same general education courses you can earn in college can also be completed in a high school AP class. AP classes also give you an opportunity to boost your GPA. Instead of a 4.0 limit, you can earn a 4.6 or 4.7 GPA by excelling in those higher courses. This gives you an advantage when applying for scholarships and financial assistance.
Contribute to a 529 Plan
If you read up on 529 Plans, you’ll find pros and cons. Simply put, it’s a tax-advantaged savings account for education expenses. It can be set up by a parent or even a grandparent to contribute to a child’s education. It’s a great plan if multiple people plan to contribute money, because many people can make deposits. And when money is taken out for education expenses, those withdrawals may be federal income tax-free, and in many cases, free of state tax, too. This money isn’t just for tuition either. It can be used for anything related to education, such as computers or books. As long as you can prove it is used for school, it’s eligible.
While 529 Plans are a great way to save for college, make sure to do your homework before choosing one. What happens if you save this money and your child doesn’t end up going to college? While some 529 Plans will give you the option to move funds to another family member, others won’t. There can also be a penalty if you withdraw the money for non-educational use. Do your research and choose a plan that is flexible and will work for you and your family.
Get a Job
In addition to the money earned, a job encourages and fosters personal and financial responsibility. Regardless of whether your child is working three to four hours a week or 15 to 20, teaching them to relate the work to the reward and to understand the value of a dollar is invaluable. That $20 they ask mom and dad for will mean something, because they’ll learn what it takes to earn it. It can also make them more responsible with their money and the work experience will look great on a resumé.
Consider Junior College
While it may not be every kid’s dream to start at a two-year school, getting your prerequisite courses out of the way at a junior college can save you a lot of money. Some junior colleges are nearly one-tenth of the cost of a four-year university. If you go this route, make sure the junior college you choose is accredited and your credits will be accepted at the college you hope to transfer to.
While many parents hope to be able to contribute to their child’s college fund, it’s important for students to know how to save for it as well. Whether you are going at it alone or you have others contributing, use these tips to create a balanced savings plan to help get you the education you’re striving for. Visit the Saving for College page on the PlainsCapital Bank website to learn more.