The Painless Way to Start Saving for College
At a time when it can be challenging to just pay your bills, the idea of saving money each month for college can be a daunting thought. Don’t worry; Shamrck is here to help. You’re going to know how to sock away a lot of money, painlessly, by the time you’re done with this article.
- Create a budget. Eliminating the excess clutter from your life can be refreshing. Keep the expenses you need for things you really love and cut out the rest. The easiest way to figure out where your money is going is to keep track of every cent you spend for a month. Then you’ll have a good idea of where you can save.
- Open up a 529 plan. There are numerous plans available; every state has at least one. You can use any plan, regardless of your state of residence. And the money can be used at any college or university in any state. The money you put in is after-tax, but the capital gains are tax-free.
- Put what you can into the 529 plan. You can set the plan up for automatic deposits or you can simply deposit the money yourself. The advantage of the automatic deposit is that the money will get in there. If you decide to do it yourself, ensure that it’s a priority. Don’t let this be the ‘bill’ that doesn’t get paid if money is short that month.
- Choose the appropriate investment option. All the 529 plans have at least a couple of investment options. Be aggressive and stick with more stock-based options early on. As college time gets closer, move the funds into more reliable investments that are bond based.
- Increase your contributions. Whenever you get a raise, put at least a portion of that increase towards the 529 plan. As you pay off debts, put at least a portion of that previous debt payment toward the plan. This way, you’re not lowering your standard of living; you’re merely maintaining it or increasing it more slowly.
If you can only come up with $50 a month, you might think that it will never be enough. But $50 a month is almost $34,000 after 18 years at 10.5% interest.
Also remember that it might only be $50 a month this year, but it might be $100 a month next year and $150 a month the next year, and so on. If you could increase your contribution by $50 a month each year, after 18 years it would amount to over $227,000. That’s a lot of money for most people and will take a big bite out of college expenses.
College will be here before you know it, so get started as quickly as possible. You don’t need a ton of money to get started. Simply save what you can and put any future additional income toward the savings plan as it becomes available. Utilizing Shamrck’s assessment, planning, and resources can help your child approach college more prepared. And using these tips to help plan for it financially can help turn your child’s dream path into a reality. Don’t let finances stand in your way.
Go to the Shamrck Dashboard today for a personalized learning plan that will help set your child on the path for success.
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