In 2016, the average student loan debt topped $37 thousand. The millennial generation suffers from a financial crisis with little hope of a debt-free future until up to 20 years after they graduate from college. Taking out loans is a common way to afford college but comes with the consequence of debt and interest. Higher education comes with a steep price, but with a little strategic planning, you can start saving for your child’s college education.
At your child’s birthday parties and other events, cards more often than not come with money. Over the years, you can accumulate a decent amount of money to put towards their college costs. Although your child will want to use this money for games, toys or clothes, save a percentage and put it in their college fund. You can still allow your child to enjoy their birthday and spend part of the money, but when your child graduates and has less loans to pay off, they will thank you. Even if you account this money to pay for books each semester, it will still assist financially.
There are a few ways to invest your money in a 529 plan. It’s designed specifically to save for your child’s future college, and comes with tax advantages. When a 529 account is opened, the money invested is saved towards college and sponsored by the state. This saving can pay for books, tuition, a car, or even housing as long as it’s a college related expense. Family members such as grandparents, or aunts and uncles can choose to contribute to the account as well.
Have Your Child Work
The estimated amount of money owed by Americans in just student loans alone is about $1.41 trillion. A parent is not expected to pay for 100% of a child’s college fund. With the cost of education on the rise, encourage your child to get a job once they’re old enough and contribute a portion of their earnings. This will help you teach your child responsibility, and prepare their resume for college and beyond. It can also help them explore potential degrees, so they’re less likely to change their college major.
Find Places to Invest
Start with a tax-advantaged savings account. This is the best way to invest your money for your child, especially if you’re financially strapped while still trying to save. By putting money away towards your child’s college education, you can invest the money so it accumulates over time.
The earlier start you get to saving the better. By prioritizing your finances, you can be on track to helping your child for a brighter future.