It’s hard to find anything close to the pride and joy having kids can bring you. From day one, you marvel at their tiny toes and big smiles. As they grow, they continue to impress you with their clever thoughts and hard work in school and beyond. As their parent, you’re there to provide them with love and support—and sometimes, that is in the form of money.
As you watch your children grow, it’s crucial to think about and plan for the future. One of the best gifts we can give our kids is a solid education. That means reading to them when they’re toddlers and helping them with their homework as they make their way through school.
As the end of high school nears, not only are grades and overall school involvement super important, but one must also consider the potential expense coming with the entry into college. If you find yourself asking, “When should I start saving for my child’s education?”—it might be a good idea to begin putting a plan in place, as soon as you can.
But, to answer the much larger question of “when,” it’s pretty simple: start saving as early as you
can , like as in the moment your precious one is born.
With the rising cost of tuition in the U.S. , the years of regular investing and saving can be impactful in helping you reach your goal. Whether you plan to foot the bill for their education or are going to cover just a portion, you could start thinking about how much you can save monthly to hit your target.
Counting the Costs
As you think about when to save for college, you need to consider the potential cost of when your child will actually be attending college, and not focus on what it may cost now.
Based on some recent predictions , you could be looking at paying about $500,000 for four years at a private college and roughly $250,000 to put your child through a four-year public university. Those are big numbers, and while some of the costs can be covered with scholarships and grants, parents may still wind up paying a good portion of the final bill.
There are several options and accounts to help you with saving for your child’s college education. Some have tax benefits and others offer flexibility, should your child decide to forgo college, so you should explore the plan that best fits your specific needs.
The difficult part in deciding when to start saving for college isn’t always as simple as picking out a savings plan. It might be less about “when” and more about “how” — finding room in your budget to meet education expenses and all your other financial goals.
Balancing College Savings With Retirement Savings
If you’re like many young parents, you may be wondering how to juggle college savings with all of your other expenses, including debts and retirement contributions. Drawing up a savings plan that doesn’t jeopardize your retirement planning or send your household finances into a nosedive, is a great place to start.
While most financial planners say parents should prioritize retirement savings over funding college, 74% of parents in a 2018 survey said saving for college was more important to them.
As scholarships, grants, and student loans may be accessible to help pay for your child’s education, the same cannot be said for your personal retirement nestegg. You should consider how long you’ll need money in retirement—at least 20 years in many cases—and seeing how that compares with just four years of higher education.
Some estimate only about 29% of parents plan to pay for all of their children’s college costs.
So for parents deciding when to start saving for college, you might not want to think of it as an either-or prospect. If you’re still stumped on how to balance both goals, it’s okay.
These eight tips for finding “hidden” money could help you get started thinking about funding retirement and college at the same time.
As college enrollment time gets closer, you could have a family discussion on how much student loan debt you and your child are willing to take on, if necessary. Some estimate only about 29% of parents plan to pay for all of their children’s college costs.
But if you’re resolved to start saving for your child’s college education, there may be a way you’re just not thinking of yet. Here are a few ideas:
Removing or Minimizing Roadblocks
Many parents who ask themselves, “When should I start saving for my child’s college?” may also be asking, “How can I reduce my own college or other debt?” Student loan debt in America has ballooned over the past decade and now stands at $1.5 trillion. That’s an average of $37,172 in loans each for 44 million Americans.
If you find yourself with hefty student loan debt while also saving for your child’s college education, there are several options that might help you to free up more money.
You may be working in a field that allows you to take advantage of the Public Service Loan Forgiveness Program for federal student loan holders. The government wants to incentivize bright young professionals to serve where they’re needed most, so it may be willing to work with some public servants to reduce their debt. Be sure to check in on the status of this program regularly to see where it currently stands.
In some cases, you may be able to lower your monthly payment substantially by applying for an income-driven repayment plan , which allows you to pay off your loans over 20 or 25 years, depending on the program. While this will likely result in increased interest costs over time, a lower monthly payment could help free up cash flow so you can save for your child’s college education while you pay down your own debts and save for retirement.
The prospect of saving for your child’s college education may also prompt you to consider reducing other expenses. One way to do this could be to refinance your student loans. Depending on your credit history and earning potential, you could qualify for a lower rate than the one you currently have on your student loans.
This could mean substantial savings over the life of the loan, depending on the repayment term you select. But know that if you refinance federal student loans, you’ll lose out on any repayment plans or protections offered by the federal government—like Public Service Loan Forgiveness and income-driven repayment plans.
Saving for your child’s college education can be daunting. Sometimes, the first step is to take control of your personal finances. See how refinancing your student loans with SoFi could help you reach your financial goals.
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