September is recognized as College Savings Month. Financing the higher education of a child brings its fair share of challenges. In order to save enough money to get a child into a reputable college, parents may face a number of obstacles.
Although the escalating costs of colleges may seem overwhelming, planning for this expense ahead of time can help ease one’s financial burden. Parents can adopt strategies and save money for the time when their child starts going to college. Here are a few ways to save and manage finances for your child’s educational expenses.
Saving From Day One
The most effective way of building up a budget for a child’s college fund is an attempt to start saving from the time the child is born. A number of steps can be taken for this purpose. Parents can start by budgeting in their children’s early years and managing their finances accordingly. Don’t get discouraged if you think you are making a limited contribution towards saving because even small amounts can add up to make an impact.
To estimate the total cost of college, parents may first need to consider whether their child is going to attend a state college or a private institution. Shortlisting a few colleges can give insights into the approximate amount parents and their children need to save for the child’s college expenses. Also, there are online tools available to help parents estimate costs.
Pre-Paying Tuition Fee
Nowadays, there are many colleges that offer prepaid packages to encourage parents to start developing a fund for their child’s college expenditures. Such packages are beneficial as they may allow you to beat rising tuition costs before a child begins college. A few such prepaid plans allow you to save and pay according to their current charges even if a student starts a few years later. Another benefit is the exemption of tax payment on savings specified for the higher education of a child. Tax exemptions may vary depending on state laws.
Utilize Home Equity
Another option is the utilization of equity as the value of real estate tends to rise with time. Parents can use this factor and turn it into an advantageous option for their child’s college education and related expenses. It may be better to acquire a home equity loan to fund a child’s college expenditures rather than letting him or her deal with student loans because home equity loans come with certain benefits such as tax exemptions.
Cutting Unnecessary Expenses
There are an infinite number of ways to spend the money you earn, but your spending should not compromise the education of your children. Deciding wisely how to spend money is very important. Parents can closely observe their spending habits and adjust accordingly in order to contribute to a college savings fund.
Scholarships and Financial Aid
Teach children practical life lessons about savings and finance. Motivate them to work hard in their academic years. An exceptional academic performance is also an indirect investment as it may lead to scholarships. Exploring scholarships and other modes of financial aid is also a useful option to make it possible for your child to attend college. If your child receives scholarship awards, then funding for college becomes much more manageable.
In conclusion, parents can take steps to ensure that their child’s college costs are manageable by taking care in how they spend money and save money throughout their child’s life.