Saving for college is a topic that weighs heavily on the minds of most parents, no matter how old your kids are. You have a lot to plan for and many questions to answer: how much should you save? When should you start saving? And where should you put that money?
Figuring this out feels scary and overwhelming. Most of these questions can’t definitively be answered because so much is uncertain — but parents need to make some decisions now and adjust as the years unfold. Consider these factors as your starting points when asking how you’ll save for your child’s college education.
Prioritize Your Financial Goals
It may sound selfish, but you need to make sure you’re own financial goals are in order and on track before you consider saving for college. This is hard for parents to hear, but you need to accept the reality: it’s far more selfish of you to rely on your adult children one day because you can’t financially support yourself anymore.
So take care of your own financial needs before you open a savings account earmarked for your children’s higher education. At a minimum, you need to be contributing to your own retirement accounts first. If your employer offers a match in your 401(k) plan, contribute at least enough to secure that — but ideally, you should be putting away 10% to 20% of your salary to create a secure financial future.
Research the Cost of College
Answering the “how much” question is tricky, because of the number of factors involved. You need to make some basic assumptions to get started, and from there you can research to get more details on how much you should aim to save.
This doesn’t need to be complicated! You can run a simple Google search using terms like “cost of college in [your state].” A financial planner can also help you with this step, so don’t hesitate to reach out for help if you’re confused or if you value a professional crafting a plan with you.
At the end of the day, figuring out the cost of college is not as important as understanding what you can afford to save for your children and what you feel is appropriate. It’s absolutely okay to assume your children will need to help with the financial burden via scholarships, working part time, or even taking out a (reasonable!) amount of student loans.
Automate Savings for College in a 529 Plan
Once you determine how much you want to save, break that down into a monthly amount. Then set up an automatic transfer from your checking to whatever savings vehicle you choose to use. The most popular account for college savings is a 529 plan — and Morningstar updates their fund rankings each October, so now is the perfect time to look into your options here and choose the funds you want to invest in.
Again, this may be where you want a financial planner to step in and lend a hand. A professional can help you make a rational, informed decision. And that’s invaluable when you’re dealing with an emotionally-charged topic like your children and their future education.
Getting help from a planner with experience — and who adheres to a fiduciary standard — can keep you and the savings you want to develop for your children’s college education on the right track.