Saving for college can feel overwhelming, especially if you're getting a late start. But if you access effective strategies and investment vehicles, saving for college can be an easier, more feasible goal.
Three tips for saving for college when you had a late start:
- Use a 529 plan. 529 plans are tax-advantaged savings accounts that can be used to pay for qualified education expenses, including tuition, fees, and room and board. Many states offer tax breaks for contributions to 529 plans, and the earnings on the money in the account also grow tax-free.
Even if you're starting late, a 529 plan can be a great way to save for college. You can choose to invest in a prepaid tuition plan, which allows you to lock in the cost of tuition at today's rates, or an education savings plan, which gives you more flexibility in how you invest the money.
- Set realistic goals. It's important to be realistic about how much money you can save for college, especially if you're starting late. If you can't save enough to cover the full cost of college, don't worry. There are other ways to pay for college, such as financial aid, scholarships, and student loans.
Start by setting a goal to save a certain amount of money each month. Even if it's just a small amount, it will add up over time. You can also try to find ways to cut back on your expenses so that you can save more money.
- Ask for help. If you're struggling to save for college, don't be afraid to ask for help from family and friends. They may be willing to contribute to your child's 529 plan or give them a gift of money to help pay for college.
You can also look into scholarships and financial aid. There are many different scholarships available for students of all backgrounds. And financial aid can help students pay for college, regardless of their family's income.
In New Jersey, there is also the Garden State Guarantee, a financial aid program that provides up to four semesters of free tuition and mandatory fees at a public four-year institution to eligible students.
Even if you had a late start, it's still possible to save for college. By following these tips, you can help your child achieve their educational goals.
What if my kid is already in high school?
Here’s a sample action plan:
Step 1: Work with a financial advisor. A financial advisor can help you assess your current financial situation, set realistic savings goals, and choose the right savings vehicle for your family.
Step 2: Set a savings goal. How much money do you want to save for college? Keep in mind that the cost of college is rising, so it's important to set a realistic goal.
The average cost of college in the United States in 2023 is $36,436 per student per year, including books, supplies, and daily living expenses. This number comes from the College Board's "Trends in College Pricing and Financial Aid 2023" report. This includes both public and private colleges, and both in-state and out-of-state tuition.
Step 3: Create a budget. Once you know how much money you need to save, create a budget that will help you reach your goal. This may involve cutting back on some expenses or finding ways to earn extra money.
Step 4: Choose a savings vehicle. There are many ways to save for college, including 529 plans, Coverdell education savings accounts (ESAs), and traditional savings accounts. Each option has its advantages and disadvantages, so it's important to choose the one that's right for your family. A financial advisor can help you understand the different options and choose the one that best meets your needs.
Step 5: Automate your savings. One of the best ways to save money is to automate your savings. This means setting up a recurring transfer from your checking account to your savings account each month. A financial advisor can help you set up this system and make sure it's working properly.
Step 6: Review your plan regularly. As your financial situation changes, you may need to update your savings plan. A financial advisor can help you review your plan regularly and adjust as needed.
Here are some additional tips for saving for college when you had a late start:
- Consider community college. Community college is a great way to save money on the cost of tuition. Many community colleges offer transfer programs, so students can transfer their credits to a four-year university to complete their degree.
- Encourage your child to work part-time. Working part-time can help your child save money for college and learn valuable skills.
- Take advantage of tax breaks. There are some tax breaks available for families who are saving for college. Be sure to consult with a tax advisor to learn which tax breaks you may be eligible for.
Saving for college, even with a late start, is achievable with careful planning and determination. By partnering with a financial advisor and creating a well-structured plan, you can empower your child to reach their educational aspirations.
Don't let a late beginning deter you; instead, view it as an opportunity to demonstrate the importance of financial responsibility and goal setting to your family.
Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This
information is found in the issuer's official statement and should be read carefully before investing.
Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s
529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult
their financial or tax advisor before investment in any state's 529 Plan.