Whether you're a parent helping out your kids save for college, or whether you're a future college student looking to save for your tuition yourself, there's no question that it can be a costly investment.
The good news is that there are many tools, resources, and strategies available to make this mountain easier to climb.
Make A Plan To Save For College
Saving for college requires making a logical plan to adjust your finances accordingly. These three steps will help you create a quick plan to save for college.
1. Calculate Your Estimated Tuition
Your total tuition cost will highly depend on which school you go to and what degree you will work towards. To save money, consider local colleges or universities that give better prices for local residents.
You can get a general idea for the cost of tuition by searching the college website and doing some basic research online about tuition costs for your state.
The goal of this step is to get a total cost for tuition based on your desired degree.
2. Calculate Monthly / Yearly Savings
How long before you or your child will be attending college? Determine how many years you have until you will be attending college so that you can estimate how much you need to save each year for tuition.
If you have 10 years before you son or daughter will be attending college, take the total tuition estimation you calculated in step one and divide it by the number of years until college attendance.
If you plan to attend college next year yourself, then calculate the cost of tuition and divide that number by the number of months before classes start to determine your monthly savings requirement.
4. Review & Update Regularly
Review your savings plan each month or year, depending on how long you have before college starts, and update your plan accordingly. Continue to look for savings opportunities such as tax refunds, employment bonuses, and other related financial changes to add to your college savings.
Be sure to consider college grants offered by employers, colleges and the city and state in which you live. Some grants are large enough to cover full tuition for one year or more if you qualify!
Ways To Save Money For College
There are multiple strategies to help you reach save and pay for college faster, starting with the three steps you followed above. To accelerate your college savings plan and lower your college expenses, consider different college savings accounts, planning tools, and ideas to save or make extra money to accelerate your savings progress.
College Savings Accounts
There are savings accounts specifically designated for college and higher education savings. They are unique in that they offer tax breaks for those who decide to use them. Some different college savings accounts available are:
- Coverdell Education Savings Account: A tax-deferred trust or savings account available through the US government that allows families to save for college for anyone under the age of 18.
- Roth IRA: Roth IRA's are actually retirement accounts that grow tax free. Contributions are made after taxes have been paid. Roth IRA's can also be used for retirement expenses as well as college expenses.
- UGMA And UTMA Accounts: “Uniform Gift to Minor Act” and “Uniform Transfer to Minors Act” are accounts that parents or guardians can set up for children used to save money that will be available to them when they are at least 18 years old.
College savings accounts like those mentioned above are helpful because they provide tax benefits and savings benefits to aid and accelerate your progress to paying for education.
College Savings Plans
There are government savings plans available, as well as companies who specialize in helping you save more money. Among some of our top picks are:
- 529 College Savings Plan: A plan that is run by each individual state in the US, thus may be slightly different depending on the state. A 529 plan can be a savings plan to save for education, or a prepaid plan to pay for tuition in advance.
- U-Nest College Savings Plan: U-Nest is a company dedicated to making it easier for parents to save money for their kids' education. A U-Nest account lets you plan for education, set up automatic contributions, and even receive gifts from friends and family.
- Save Money With Qapital: Qapital is a modern finance app similar to traditional bank accounts that lets you save money using customized rules. For example, you can set up a savings rule that every purchase you make, it rounds up to the nearest $2 and saves the spare change. If you spend $0.50, it will round up to $2 and save the additional $1.50 for you. This is one among other rules you can create to aid your savings.
- Invest Your Spare Change With Acorns: Acorns is the pioneer of round ups. They let you round up your daily purchases to the nearest dollar and the change is invested into a customized investment portfolio for you. It's a great way to save money automatically without noticing your budget being any tighter.
Tips To Cut College Expenses
It's like buying the name brand shirt vs buying the same shirt at your local retail store. They are the same thing, but one costs ten times more due to the name alone!
These tips will help you know how to save money on college expenses, without having to pay extra for “name branded” merchandise.
- Purchase Used Textbooks: Used textbooks cost a fraction of what the new textbooks cost. You have to purchase your books early to take advantage of the available used books, otherwise they get purchased quickly and you're forced to buy new.
- Rent Your Textbooks: Another option to choose from is renting your textbooks. This also costs a fraction of what it would cost to buy the books brand new.
- Live at Home: If you're going to a college within 30 miles of home, there's no need to pay for extra housing to live on campus. Remember, the goal is to pay for college, and it may take small sacrifices like this.
- Purchase A Meal Plan: Meal plans are great options to save money on food when going to college. Most colleges offer cheap meal plans at their cafeteria so students can quickly eat between classes.
- Use Public Transportation: Most college campuses also have public transportation that takes students to and from campus to surrounding neighborhoods, and its free of charge.
- Consider A Community College: Community colleges are always much cheaper than going to a major university. The reality is, if the college is an accredited school, your degree will be all you need to get into jobs at major companies.
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Following these tips will save you hundreds if not thousands of dollars each month that could otherwise be used for paying for your college tuition!