Financing the higher education of a child has its fair share of challenges that parents may need to overcome. Escalating college costs may seem overwhelming, but planning for this expense far in advance can help ease one’s financial burden.
Parents can adopt money saving and management strategies for the time when their child starts this new chapter. Here are a few suggestions.
Saving from Day One
The most effective way to build up a budget for a child’s college fund is 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 toward 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 schools can provide insight into the approximate amount the family will need to save. 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 use of the 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/her deal with student loans. Home equity loans have 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 being mindful of how they save and spend money throughout their child’s life.
Financing a college education can be a great challenge for many parents. The solution to this problem may lie in the decision to save money over a long period of time.
Information appearing in this article is obtained from sources we believe are reliable. The information may not be a complete statement of all available data and is not guaranteed as such. Marine FCU is not responsible for the contents of this article and advises its membership to investigate claims before following the information provided.