The fact that the cost of today’s college tuition and related expenditures are high cannot be overemphasized. As a parent, you need to practice healthy education planning for your children when they are young or you may struggle to help them financially when they are ready for college. After all, the costs of education keep rising each year. Discover the 3 basic principles for education planning and follow them to prepare for this huge financial liability.
3 Basic Education Planning Principles to Plan for Education Savings
Principle 1: Start saving early
The saying ‘you reap what you sow’ possibly applies more in education planning than anywhere else. The earlier you start getting ready, the more prepared you’ll be in the future. Learn to put money aside for your child and keep the money there. Do not spend it on other needs, not even emergencies. Here are some ways that you can save for your child’s education:
- Education insurance- Invest in an education insurance plan from a trusted company. Use their appreciation calculator to identify the amount that your child will need to attend college. You will then sign an agreement on your contribution amount and the amount that the company will pay. For example, if you know that your child will be college age in 16 years, estimate the amount that a 4-year college degree will cost at that time and start paying monthly premiums now to reach your goal.
- Government Education Savings Plans-Look into what your state offers for education planning.
- Open a savings account- While an insurance plan pays the tuition fees and other statutory charges, it may not provide cash for spending money and other necessities such as food. For these needs, open a separate savings account at your local bank. More importantly, teach your children to save money. Go shopping with them and let them learn how to save money with coupons. After learning good spending habits, they will be more likely to practice them as they grow and as they study in college.
Principle 2: Manage your spending
Old habits die hard. This saying applies in education planning just as well as it does in other aspects of life. Set aside a small portion of your monthly income to go to savings. Your local bank should do this for you at no charge.
- Recondition your mindset- Set an automatic deduction from your paycheck every month and forget about it! Recondition your mind to believe that you actually earn a figure less the deduction. Get your spouse and children on board to living on a lower monthly salary.
Principle 3: Involve your children
It’s a good idea for the children who will be affected by your education planning to understand what you are doing when they are young. Let them understand how expensive college can be. This way, they will appreciate your efforts to secure them a decent education. Here are some tips that can help you achieve this.
- Wise savings- If your teenager has part-time employment, let them contribute to their education planning by setting aside part of their earning for education planning.
- Digital calculator- Invest in a cheap college cost estimator and show your children how it works. This calculator could be a mobile phone app or PC software. It helps you arrive at a realistic figure for future college tuition based on the current and past trends. More importantly, take your children as you visit your education planning adviser.
Do not delay! Call the professional education planning professional at MultiGen Wealth Services to start saving for your child’s future.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.
Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.