April 8th, 2013
Make a College Savings Plan for Your Kids (or Yourself) on a Budget
**Today’s guest post is contributed by the editors of The Allstate Blog.**
Even if your child hasn’t yet learned to walk, it’s never too early to start saving and budgeting for his or her college education. In these tough economic times, when it comes to creating and adhering to a successful savings plan for college, you may need to work over the long term to save enough money. In order to get a substantial head start on the rising cost of tuition, it’s a good idea to have several eggs in your basket when you’re budgeting for college.
Start Small
According to the National Center for Education Statistics, undergraduate tuition for the 2010-11 school year was estimated to be $15,605 at four-year public institutions and $31,975 at four-year private schools, and these numbers have been on the rise since 1980. If this trend is any indication, you can probably expect the cost of a college education to continue to increase.
As a parent attempting to save for a child’s future education, these figures can be daunting. However, in order to get over the shock of the initial sticker price and set the groundwork for a successful college savings plan, you’re going to have to start small and put the big picture on the back burner. Your toddler is only in diapers, remember?
If you’re able to put $10 a week into a college savings account, it will amount to $9,360 over 18 years. An interest rate as small as 4 percent could also yield a heftier total of $13,875 over 18 years. If you’re able to set aside $20 a week, then you’ll have $18,720 at the end of 18 years.
529 College Savings Plans
Another option you may want to explore is the 529 College Savings Plan. Created in 1996, 529 College Savings Plans are operated by a state or educational institution and are specifically designed to help families save money for college. Whether you want to have a set sum of money directly deposited from your paycheck or make deposits on your own, the funds are invested and will earn interest similar to a 401(k).
One of the major benefits of 529 Savings Plans is that grandparents, friends and loved ones can all deposit money into these accounts. If your son or daughter has more toys than they know what to do with, you can encourage relatives to contribute to the college fund when birthdays roll around instead of adding to the clutter of colorful plastic.
Alternative Ways to Save
While saving money for college is likely your first priority, there are also ways to budget money once a child is enrolled at school. Money-saving tips for college students include buying used books instead of new ones, applying for work study programs, or even living at home instead of in a dorm, as this will help cut the cost of room and board.
When you’re establishing the groundwork for a successful college savings plan, it’s best not to get overwhelmed by the big picture. Starting early and working on a steady plan can help make saving for your children’s education fit into your budget.
This guest post comes from the editors of The Allstate Blog, which helps people prepare for the unpredictability of life.
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