When you decide to have children and bring them into this world, it is essential to prepare for their future. While it may seem like their high school graduation is years away, the time will come much quicker than you think. This means you must be ready for the next step after high school: college. How much should you save for a college fund? When should you start? Here is everything you need to know to plan for the special milestone.
How much should I save for my children?
The easy answer is to recommend trying to save as much as possible. If you have any leftover money from bills and other household expenses, create a college savings account and put as much as you can afford into it each and every month. When your children get to high school, ask them to research and find the top 5 colleges they want to apply to. This will help you understand if you are putting too much or too little away for them. It’s also important to recognize that you are raising young adults! If their dream college is fairly costly, sit down with them and discuss their own financial plans until graduation, like getting a summer job or a paid internship at a local business. While they are your responsibility, it is their future, too.
How Much Does The Average Person Save?
According to a 2020 study from Sallie Mae, parents who planned for their kids’ college fund averaged $28,389, compared to parents who didn’t plan, only averaging $14,999. Of course, your total amount will depend on several other factors, including your income, if you’re a single parent, and how many children you have to plan for. The main goal is to help your children as much as you can to avoid those costly student loans.
What Is The Best Way To Save For A Child’s College?
When preparing to save for your kid to go to university, we highly recommend you start a 529 plan with your bank. 529 saving accounts are a tax-free way to invest in their future. The best part is that if your child does not decide to go to college, it is not the end of the world regarding your finances. Depending on the plan you set up with your bank, you could transfer those funds to another of your children or invest in yourself and use that money to go back to school. As long as the money is used for education purposes, you can use those savings any way you, please. You could even take a pay cut and withdraw your money! Nerd Wallet has a complete online list of 529 plans according to each state, including what each state requires for a minimum contribution to the account. Happy savings!