We started saving for college shortly after my daughter was born. “No problem,” we said. “By the time she is ready to go to college, we should have plenty of money.” Want to guess how wrong we were? Hint: A lot. We forgot to consider the spiral of tuition increases each year. Now, with our son in college, I look at his dwindling college fund and think, “Hope you didn’t want that future senior year in college, son.” Of course, I’m kidding, but it pays to save in advance. Here are 5 Simple Ways to Save for College.
This is a partnered post with BusyKid. All opinions are mine.
How To Save For College
1. Invest in a 529 Plan. This is the low maintenance way to invest in college. A 529 Plan is a special account that allows you to deposit money towards college. Sure, there are lots of plans that allow you to do that, but this one is special. Any money you withdraw to use for educational purposes is tax-free. The money can be used toward tuition, books, or even meal plans with no tax penalties. One of my favorite benefits of this plan is that I, the donor, am in control of the money. The kids cannot withdraw funds on their own so there is no worry it will be used unwisely. While this can be started at any age, its best to start them when the kids are young and you have time to build it up before they leave for college.
2. Start a Change Jar. Seriously, this is my favorite idea. Ever. All you need is a one-gallon jar and change. Or, if you like to see results faster, start with a quart jar. Write your child’s name on the outside of the jar. If you have more than one child, you will need one jar per child. Whenever you have spare change, place it in the jar. That’s it! Everyone in our family knows that no change is safe from me. Spare change in the washing machine or dryer? Change lying on the floor or driveway? Change found in the car? It goes into the jar. I’ve even been known to stop to pick up change left in parking lots, much to my kids’ embarrassment. At the end of the year, count all the money and deposit it into a savings account or 529 Plan.
3. Save that Birthday and Holiday Money. Kids get lots of cash over the years from doting relatives and from friends. When the kids are young, it’s easy to tuck that money away into their college fund. Later, it gets trickier. Who wants to put their money in a college fund when there are so many fun things they can buy and use now? When kids get older, ask them to put a portion of their money in their college fund. It’s much easier to convince them to put five dollars out of the $20 they received than the entire amount. The kids can still purchase items they want and save some money for the future.
4. Buy Stocks Instead of Toys. Does your child have an overstocked toy chest? Does she only play with a few of them? I know, over the years, I purchased way too many toys for my kids. Other than their favorites, they rarely played with them. While the baby has far fewer toys, she still has a large assortment. A better way to handle this would be to purchase stocks instead of toys. We did this with our daughter and she sold them later to pay for her car. If your children are older, BusyKid can help teach your children about saving.
It’s a new app that is designed to help children learn about finances and saving. Parents can sign up for an account online at a price point of $14.95 for the entire family. Once signed up, parents can create chores with dollar amounts for their child. Kids are able to see a list of their chores and check them off when they are done. On Fridays, kids receive their weekly allowance. Now comes the fun part; deciding how to budget their money. The kids have the option of saving their money in a FDIC insured bank account, investing in a variety of stock options, give to charity, or buy and spend gift cards at over 250 outlets.
Parents can send additional money for special chores or activities, like making straight A’s, through the Bonus Feature. If you enroll now, two kids in your family will be able to receive a free $10 stock. This allows them to learn to invest and deal with the stock market. Plus, BusyKid has just introduced the BusyKid Spend Card, a reloadable Visa® prepaid card, where kids can move their allowance in order to spend in stores or online. It’s an early lesson in budgeting and using a debit card.
5. Get A Part-Time Job. When the kids are in High School, allow them to have a part-time or Summer job. Once again, they will want to spend their money on fun activities and hanging out with their friends. No problem. Ask that they save a small amount of their paycheck each week to be deposited in a savings account. While $20 a week might not seem like much, it adds up. If they save $20 a week for 52 weeks, they’ll have $1040 at the end of the year.
How do you save money for college? Share your tips with us!