Saving for your children’s education

The best graduation gift you can give your child is to help him or her leave college with minimal or no debt. To do that, it’s best to start saving money for college or career school now. Here are a few reasons why.

• Rising college and career school costs: College costs increase at about twice the rate of inflation. Be prepared to handle them by saving early and consistently! Use this collection of cost calculators to estimate what college and career school will cost at the time your child is ready to attend.
• The savings accrual benefit: No matter how little you save, every cent makes a difference. Develop realistic savings goals, and save regularly by placing aside a set amount at a set time. For example, if you save $14 per week in an account that earns at least 1% interest, you will accrue more than $13,000 at the end of 17 years.

If you save $14 per week in an account that earns at least 1% interest, you will accrue more than $13,000 at the end of 17 years.

• Less debt, more investment: Many families have to rely on student loans to cover college or career school costs. Saving for college or career school now can reduce your need for a loan in the future. In addition, you can earn interest by opening a savings account today versus paying interest on a loan later.
• Education-specific savings opportunities: Prepaid tuition and college savings plans (known as “529 plans”) offer tax-free withdrawals for college or career school expenses. You can learn more about these plans here.

While you save, keep tabs on your child’s eligibility for financial assistance through the Dept. of Education’s Office of Federal Student Aid, which provides more than $120 billion in grants, work-study funds, and loans to help pay for college or career school. Through their website, you can learn about eligibility for federal student aid, and estimate the total amount of aid your child could receive if he or she were applying to college or career school this year. (For more information about federal student aid, visit StudentAid.gov, or call the Federal Student Aid Information Center at 1-800-4-FED-AID; the deaf or hard of hearing can call 1-800-730-8913.)

Adapted from the this article by the Office of Federal Student Aid.

FOR MORE INSIGHT

On saving for college
College Preparation Checklist (Office of Federal Student Aid)
Calculators (FinAid)
College Savings Plans Network

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