By Team Tomorrow
Published September 13, 2021
Saving money for college is a marathon, not a sprint.
Finding money to squirrel away is hard. To help, here are 7 saving money for college tips:
Two significant enhancements were made to the child tax credit this year. First, the law increased the credit amount from $2,000-per-child to $3,000-per-child, and to $3,600 for children five or younger. Second, eligible families are receiving advanced payments from July to December.
Important note: These are advanced payments that you would otherwise receive in bulk when filing your 2021 tax returns, not an additional credit.
You can use the extra $1,000 per child to invest in a college account. As demonstrated in our post about how to save money for college, an extra $1,000 a year can make a huge difference. If you invested $1,000/yr for 18 years into a fund that made an 8% return, you’d have an end balance of over $41,000. That type of cash can make affording college much easier.
Money.com states there are several college savings accounts that are excellent for paying for your child’s education. 529 accounts are among the most popular, but there are many other options to choose from, including:
Our post on college financial planning weighs the pros and cons of each of these options—and more.
You can routinely save money each month by setting up automatic transfers from your checking account to a college savings account. Recurring transfers take the burden of remembering to put money into the savings account each month.
Depending on your job, you can also automatically deposit a portion of your paycheck directly into that account. Doing this makes it so that the money never enters your checking account. You won’t be tempted to spend it if you don’t see it.
Set aside a percentage of every raise, bonus, or unexpected influx of cash you receive. By taking 10% of your raise and adding into a college fund, your money can accumulate quickly. Without ever using that extra 10% as part of your monthly budget, you won’t even notice it when it’s not there.
According to the National Cancer Institute, the average cost of a pack of cigarettes is $6.28. If you smoke a pack a day, quitting can net you $188 per month, a total of $2,292 per year. If you take money and put it into a college savings account, you can save enough to pay some or all your child’s college tuition.
Also, your lungs will love you for it.
If you don’t smoke, you can also save money by:
Like with cigarettes, think about your small spending habits on an immense scale. If you buy a $3 soda from your office vending machine daily, it adds up. That $3 a day is $15 a week. If you’re at your office 50 weeks a year, you’re spending upwards of $750 on that soda.
Bring your own soda instead and put that $750 away for college.
When you’re thinking about saving money for college, life insurance policies probably aren’t even on your radar. They should be.
A permanent life insurance policy offers you living benefits, and one of them is paying for college. It doesn’t even impact your financial aid (at least not for the first two years)! Taking this money out can affect your death benefit if you don’t replenish these funds, but even if you don’t, you get to help your children prepare for their future. The trade-off is worth it.
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