Every Parents’ College Dilemma

How you can save for your child’s college education

According to Sallie Mae’s “How America Saves for College” 2016 report, only 37 percent of American families are using a 529 plan to save for college. A 529 plan is a college savings plan you invest in today to save for future college expenses. Most 529s are opened by parents to pay for their children’s education, but you can also start one for yourself to pay for your own college education or advanced degrees.

Quick tips on 529 plans.

For some people saving for their children’s college education is a personal debate. Some parents feel obligated to pay for all of their children’s education, while others are willing to save enough to contribute but are alright with their children taking on student loans. Another group of parents think saving for college, when they are barely making ends meet, is an impossible feat.

With the average student in 2016 graduating with $37,173 in student loan debt, there is more pressure on parents and children to avoid student loans. So I encourage you to save whatever you can. This article will show you how saving for college can be simple if you commit to as little as $25 a month, consistently.

Decide Your Position on the College Debate

My husband and I both come from single family households and our mothers were not in a financial position to pay for our college educations. My mom contributed what she could but I also initially worked two jobs, applied to dozens of scholarships, and took out school loans. My husband also used scholarships, financial aid, and loans to finance his education.

As two people who were able to earn an education and find rewarding careers, we know that our children are already in a better situation than we were, but this also means they may not qualify for the same level of financial aid, if any.

Even before we got married one of our long talks included what we hoped to do for our unborn children when it came to college. Personally, I think that working in school and incurring student loans helped me feel invested in my education. Loans also taught me responsibility and about paying back debt after graduation. I had to quickly learn how to manage my living expenses including my loans. Therefore, I feel that a little student debt is not necessarily a bad thing.

My husband, on the other hand, initially thought we should go all in, and give our children what our parents could not provide. This ideology caused me panic, I must admit. The idea of going broke to afford the prices of college in 2030 genuinely frightened me.

That’s when I started my research and discovered 529 plans. My husband and I settled on a compromise. We would save as much as we could and let our children decide where to go. They could take what we saved and go to my husband’s alma mater, University of Florida, or they could use our pool of money towards another school and if our funds did not cover it all — they could use scholarships or loans to cover the rest.

After that we got to work and started saving.

Step 1: Start saving before your kids are born

While I was pregnant with my oldest son, Rashad, I opened his college fund. Since he did not have a name, let alone a social security number, I had to put the account in my name.

I started a 529 plan with the minimum deposit of $25 and committed to $100 a month thereafter.

Once my son was born and given a social security number I transferred the account into his name.

Step 2: Save more when you can

When my husband and I received pay raises we increased all of our savings — retirement, personal, and college fund contributions. We let no new dollar go to waste. Also, when my son received monetary gifts from family and friends I put those checks into his college fund. I figured he was a baby and had all the toys in the world. However, time and compound interest would help multiply the family contributions and help him get a college education. That was a true gift!

Step 3: Contribute consistently even if not at the same amount

So in 2016, my husband and I purchased our first single family home. We expanded our square footage as well as our bills. Given this reality some aspects of our budget had to be adjusted. We had to make a few tough choices and one of them was to reduce our college fund contributions.

I did all I could to adjust other expenses first, but eventually it was clear that the college savings needed a slight adjustment too. The key is to keep investing, even if you have to change the amount.

My husband and I are contributing to our children’s education, but we cannot neglect other responsibilities while doing it. Cutting back some expenses, including contributions to college funds, helps us keep our monthly budget in order and we can still save for retirement and unexpected emergencies.

Our contributions were cut back but we still understand the power of compound interest and time, which will multiply our money. Rashad is only six and we already have a year of college tuition costs saved. Dylan is four and he has one semester. All of this money did not appear overnight, but the success of establishing the college funds, saving financial gifts, and our consistent contributions led to this progress.

Any amount of money you save for your children’s education can help.

It’s Never Too Late to Start Saving

Truth is, any little bit can help. If you are not in a position to save $100 or more a month for your children’s education, then start with $25. Each contribution adds up and eventually you may save enough to cover one semester’s books or a class or two. If you have a steady income and solid monthly budget, consider making your monthly contributions automatic. For some funds, you get a break on fees or other benefits when you sign up for monthly contributions.

If your child is currently in college, it’s still not too late. If you commit to the RRD Investments’ Savings Challenge you could save $1,378 by the end and contribute that money towards your child’s education.

January 1st, my company, RRD Investments, launched a 52-week savings challenge on all our social media platforms. The challenge is simple. You save $1 during the first week, $2 in the second week, and continue to increase the amount you save by $1 each week. By the end of the year, if you stick to the challenge, you will save $1,378.

People who sign up for the challenge receive weekly advice and tips from me. Throughout the challenge, I serve as a personal cheerleader reminding you to make your weekly contribution to stay on track.

Get started and watch the money grow. Trust me your children will thank you for it later!


Sources:

Aimee Picchi,“Congrats, class of 2016: You’re the most indebted yet” http://www.cbsnews.com/news/congrats-class-of-2016-youre-the-most-indebted-yet/ (May 2, 2016)

SallieMae https://www.salliemae.com/research/how-america-saves-for-college/ (2016 Report)


For more tips and tricks on how to save and improve your finances follow me on Twitter and Facebook. If you are interested in financial coaching contact me and the Spyka team here.