Did you know that September is National College Savings Month? Oftentimes, families do not consider the cost of college until it’s time to start looking at colleges, which is typically during a student’s junior year. While it’s never too late to start saving for college, these families have missed nearly 16 or 17 years of savings opportunity.
In celebration of National College Savings Month, take a look at our top seven ways to practically save for college – no matter where you are in the process:
Top Seven Practical College Savings Tips
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1. Set goals.
You may look at the current cost of college and think you’ll never be able to save that much. Well, good news; you don’t have to!
Just like any other big expense, such as a car or a home, you pay for college over time. One third of college costs will come from past income in the form of savings, one third will come from current income and financial aid, and one third from future income in the form of loans.
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Utilizing a college savings calculator will help you as you set goals: FinAid College Savings Calculator
2. Save with a 529 College Savings Plan.
Consider saving for college with a 529 College Savings Plan. It offers both tax and financial aid benefits. Parents can save for children as soon as birth with a 529 college savings plan, and they are offered by every state.
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When used, the funds are free from incurring state or federal taxes; however, if the funds are used for anything other than qualified education expenses, there is a tax on the withdrawal amount.
Parents can use two different strategies to save. One strategy focuses on starting off small and then investing more as the child nears college age. The other is a custom strategy that enables parents to decide how much to allocate toward college savings whenever they want.
3. Save sooner rather than later.
A dollar saved now is one less dollar you’ll have to borrow in student loans. If your child has just been born or just started their senior year, it’s never too late – or too early – to begin saving. However, starting earlier rather than later will enable you to take advantage of college savings accounts that offer interest. With the help of interest, you’ll be able to reach your college savings goals faster.
However, even if college is just a year or two away, the short-term tax benefits can be worthwhile. Some state 529 college savings plans offer a deduction or tax credit on your state income taxes, which is like getting a discount on college costs.
4. Make saving automatic from your accounts.
College savings contributions can be automatically deducted from your accounts, making saving for college easy and stress-free. Plus, you’ll consider that money already “spent” for the month and won’t have the temptation – or in some cases, the option – to spend it elsewhere.
5. Save all that you can.
Whether you can save $50 or $500 each month, it’s important to save whatever you can and commit to that figure. To start, save a small figure each month. As the college years approach, commit to saving even more. Whatever the case, work to save an amount that is feasible for your monthly or annual budget.
6. Save a portion of large “bonus” dollars.
Sometimes, life happens – in a great way! Whether it’s a tax refund, an inheritance or a lottery win, there will be occasion where money that you didn’t account for comes your way. In those cases, siphon off some of that money for college savings.
7. Maximize your savings with a rebate program.
There are several college savings rebate programs, like Upromise
and SAGE Scholars Tuition Rewards
. These rebate programs enable you to earn rebates from your purchases from retailers that are automatically contributed into your college savings plan. Even if you don't change your purchasing habits you can still earn hundreds or even thousands of dollars of rebates that will help your college savings grow.