Your college savings goal will be shaped by a number of factors: how many children you have and their ages, the kinds of schools you’re looking at, accumulated savings, and the resources you expect to have available from borrowing, financial aid and other outside sources. And the younger your kids are, the harder it is to know how much college will cost.
Because you can’t predict how much outside funding will be available, it’s critical to start saving on your own as early as you can and as much as you can.
Just getting started is one of the big keys of successful college saving. There are lots of ways to do that—and some of them don’t even involve your own money.
What’s a Dollar a Day? To get going, you can start small – by putting even just one dollar a day into a college savings fund. Of course, ideally you’ll want to boost your savings rate over time. But starting from birth, one dollar a day ($365 a year) that earns 5% a year compounded annually will yield more than $10,000 (before taxes) after 18 years – not a bad start on a tuition bill.1
Ask Family to Help. You can encourage grandparents and other family members to make contributions for college in place of other kinds of gifts. For example, many grandparents are finding that 529 college savings plans, set up with grandkids as beneficiaries, are good devices for making such gifts.
Save While You Spend. Another option worth exploring is the growing selection of credit cards that allow spenders to earn a contribution to a college savings plan, based on expenses charged to the card. Obviously, overuse of credit in order to earn a contribution to a savings plan can be counterproductive. But the savings generated through prudent use of credit can be a nice addition to your other savings activities.
Put Your Savings on “Auto Pilot.” One of the best ways to make saving relatively “painless” is to set up a college savings account with an automatic investment feature that allows for regular – say, monthly – transfer of funds from income deposited in a regular savings or checking account. This way, college saving becomes a scheduled obligation that you’ve committed yourself to meeting every month, year in and year out.2
Talk with a professional. A financial advisor can help design a plan that not only puts you on a college savings track, but also helps you focus on the big picture. By working together you can develop a financial plan to help save for retirement, college or other future financial needs you may have.
It’s easy to focus on big college price tags and get discouraged before you start. But the fact is that consistent saving over time does make a difference. So take a first step – and then stick to the path.