One year of college at a public institution in the U.S. cost $15,022 in 2013. The average private American university’s tuition was $39,173, according to the National Center for Education Statistics. Now imagine what the cost will look like 18 years from now. Yikes! And, that’s not just for those parents who are state-side. Families around the globe all feel the bangs of having to save. Even though your little one is ready for diapers, and not for diplomas, you need to start saving now. This doesn’t just apply to your child’s education. Saving for your child includes putting aside money for healthcare costs, sports/activities and unexpected expenses.
What can you do to start saving?
- Get ready right now. Starting as soon as possible is always to your family’s advantage. The longer you save or invest, the greater the returns are likely to be. It seems like a no-brainer, but the average age (of the child) when parents start saving for college is just under 6-years-old, according to the financial lender Sallie Mae. That’s six years lost when it comes to potential interest earned.
- Find out who else can and will contribute. Saving for your child’s future is something that the rest of your family may want to share (or at least help out) in. Some college savings plans allow other family members to open and contribute to the account (in other words, you don’t have to be the main account-holder). Even if you don’t have a plan that allows this available, you can still get grandma, grandpa or aunt and uncle to help. When relatives ask what your child needs for birthdays or holidays, bring up the idea of a savings donation.
- Set a goal. Simply ‘saving’ might not be enough. You need to know how much money you’ll need and by when. Setting a dollar amount goal (whether it’s for educational expenses, healthcare or anything else child-related) can help you to focus and figure out a plan that works. Make a list or spreadsheet that clearly spells out each category of financial need. Project future costs and add dates that you need to meet to ensure adequate savings.
- Try a traditional savings account. If you want to go old-school you can set aside money with a regular savings account or an interest-earning money market account. The pros to these plans are that you can withdraw money anytime (typically without a penalty) and you may not have to meet a minimum amount. That said, the interest rates are typically low and you will pay taxes on money earned. These accounts may make sense if you have short-term expenses that you want to save for. For example, you know that soccer season is coming up. You’ll need to pay for a uniform, shin guards, brand new cleats and a hefty pay-to-play fee. You can slowly sock away money in your savings account for a few months beforehand. This makes less of a bite to your budget when you need to start writing checks.
- Investing in stocks or mutual funds may bring in a greater earning potential than a savings account would. Keep in mind, you don’t have to go it alone. Hire a qualified broker to help you invest for your child’s future.
How do you plan on saving? Tell us, so that we can inspire others with your perfect plan! Submit your imaginative savings ideas to us at [email protected] for us to share.