The economic benefits of a college education are unmistakable.
A college degree gives your child a greater chance of higher earnings over a lifetime of work, as well as a wider field of opportunities to choose from. Here are a few more tips to help you along the way as your family pursues this savings goal for your children.
•Take another look at your family budget. It could be that your family will be able to contribute more to college savings if a few expenses are cut. Update your budget, or if you don’t have a budget, start putting one together. Look at your expenses for the previous two months, and figure out how much is going to your various costs. You may be able to find more modest alternatives to your high expenses, and increase your college savings from those sources.
•Spend more time on low-cost activities outdoors. Guam has a lot to offer when it comes to beaches, hikes and outdoor activities for the family. These also have the added benefit of being low-cost activities, which can help you put more money away toward college savings. Making a habit of entertaining your family through these activities can shrink your family’s immediate expenses and help you save for years to come.
•Consider college savings as gifts. Is your family in the habit of exchanging gifts with other families? One idea to discuss with your friends and family is the possibility of making college savings an option in gift giving. You can talk with other parents about splitting the amount that you usually spend between a gift and a college savings deposit, so that the child has both an immediate gift and long-term savings.
Another benefit in an early college savings gift is that it’s likely to grow and compound over the years beyond its original value, especially in a tax-advantaged college savings account or other investment vehicle.
If you and other parents start this college savings gift giving together, you can keep lists of the amounts contributed, together with your own contribution records. When the child becomes a teenager preparing to go to college, you can show him or her this list and the contributions that have added up throughout the years. It can be inspiring for your teen, to see a group of people pulling together for years to provide him or her with the opportunity to go to college.
•Discuss your situation with financial professionals. A financial professional can help you plan, prioritize, and manage your major savings goals, including college savings, retirement and other long-term expenses. If you don’t already have a retirement plan, you should ask about the best way to allocate your savings between retirement and college savings. A professional also can advise you on the specific tax benefits that are available to you, and help you understand different investment vehicles.
College savings can have a ripple effect for decades into the future. What you save now can free your child of a larger burden of student loans after college, leaving your son or daughter free to focus on building a career. Any amount that you’re able to put away will certainly help, as your child starts on a new chapter of independence in his or her life.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 19 years experience in retail banking and with financial institutions in Guam and Hawaii. You can email him at email@example.com.