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How to Plan for Your Child’s College Fund

December 12, 2013 by Momstart Leave a Comment

How to Plan for Your Child’s College Fund

Guest Post

Being a parent presents a multitude of challenges. The day-to-day can be stressful enough. When you begin to look at the long-term future for your child, it can be a dizzying thought. Of these, college is certainly at the top of the list.

Like the title says – here are some things to consider when planning for your child’s college fund.

When to Start Planning

There is no better point to start than when they are at an early age.

·  You have additional time to implement a savings plan

·  You have additional time to set aside discretionary income

·  You have additional time to build interest on the savings

The cost of higher education continues to rise across the board.

To examine this rise you can look at previous college inflation rates:

For the 2010/2011 academic year, tuition and fees at four-year public colleges for in-state students averaged 7.9 percent, tuition and fees at four-year public colleges for out-of-state students averaged 6.0 percent, and tuition and fees at four-year private colleges averaged 4.5 percent.

The average tuition cost has seen a 2.9% one-year increase on average for in-state students at a four-year college (as shown by the trend map presented by CollegeBoard.org).

To combat this growing rate in tuition and inflation you should realistically begin planning for your child’s college fund before they are born. Each passing year you fail to start saving is another year you miss out on compound interest.

What to Consider

There are multiple options to begin saving money for your child’s college fund. The amount set aside will be completely dependent on the amount you’re willing (and able) to commit.

As noted by FindAid.org:

Saving $200 a month for ten years at 7% interest would yield $34,818.89. Borrowing the same amount at 6.8% interest with a ten year term would require payments of $400.70 a month. At 8.5% interest the payments increase to $431.70 a month. (If your return on investment is 4% instead of 7%, you’d accumulate $29,548.13. Borrowing this amount at 6.8% interest would entail monthly payments of $340.04; at 8.5% interest the monthly payments would be $366.35. If your return on investment is 10%, you’d accumulate $41,310.40, corresponding to monthly payments of $475.40 at 6.8% and $512.19 at 8.5%.) So if you elect to borrow instead of saving, you will be paying 1.7 to 2.6 times as much per month.

Considering this example, we can see that our best option is to consider an online high interest savings account. Compared to most physical banks, these types of accounts offer a higher interest rate for the savings. They also generally lower the restrictions on what’s needed to start such as minimum balance and initial deposit.

Alternatively, there are options such as a 529 plan which, as stated on the SEC.gov page, “Investing in a 529 plan may offer college savers special tax benefits. Earnings in 529 plans are not subject to federal tax, and in most cases, state tax, so long as you use withdrawals for eligible college expenses, such as tuition and room and board.”

A wise decision is to consider multiple options when saving and explore the market. There are plans with high yields (with appropriate risks) whereas others offer slow, consistent growth.

How to Find Savings

As noted – the earlier you begin saving the more your child will have for college. This also means less of a strain on your budgeting and finances since the savings are stretched out over a long period rather than piled on toward the last few years of their high school experience.

Here are a few ways to find available savings for college goals:

·  Live within your means – Configure a budget that allows your family to live below their means so that money is available to go toward savings. Find ways to stay entertained besides shopping, eating out, or becoming consumed by consumerism. Look for long-term “wins” within your household rather than short gains that are generally expensive in comparison.

·  Reach out to family & friends – Ask your family and friends to consider helping toward your child’s savings rather than exuberant gifts during their birthday and holidays. Even a little amount from family and friends can amount to a sizeable chunk of the child’s college tuition.

·  Pick up a side earner – Begin using your skills and expertise to pick up the occasional odd job for friends, family, and neighbors. Find time to do these activities during the weekend or late at night when you’re free from normal obligations.

·  Distill a habit of savings – Talk to your children early on in their lives to distill the importance of savings and proper financial management. Start them with an allowance and share the benefits of waiting to make a purchase. Help them find a job, when they’re ready, and they will have the knowledge and patience for savings that will help, tremendously, with college costs.

The Big Payoff

If you play your cards right you will guarantee security for your child’s education. Remember that the earlier your start the more they will have. Also, explore your options for savings and bunker down on your own habits in spending. The big payoff is well worth it for your child.

Filed Under: guest post Tagged With: college, guest post, How to Plan for Your Child’s College Fund

Season Of Giving Day 17: Schools Are Always in Need

November 17, 2011 by Momstart 6 Comments

By Summer

If you’re a parent, chances are you have a child in school, even if it’s a toddler group or preschool. The thing is schools always need money. ALWAYS! Give and find ways to give savvy.

Toddler Groups / Co-ops – Find out if your program is a 501(c), this will help increase your giving power. Your work might be able to match your donation and/or use the tax deduction. These types of programs might also like to take your physical donations such as gently used books, toys and puzzles.

Woodinville Toddler Group-0002-20100308

Preschool / Kindergarten Prep – Your program might also be a 501(c), check with them and remember to match and/or use the tax deduction. Some programs have fundraisers, which actually fall on the parents, not the children! Some preschools will take physical donations of used books, toys, puzzles, and art supplies.

FWPreschool Dad's Day-0027-20110211

Elementary Schools – Most of their outside funds come from the PTA which will do multiple fundraisers a year to acquire funds to improve the school. Some schools also accept Box Tops for Education and Campbell’s Soup Labels, so collect and turn them in!

Middle School / Junior High – Different programs and clubs will accept private donations, such as rhetoric or band. Students at this age still end up doing fundraisers for the PTA or for extracurricular activities.

High School – This is all about private sponsorship. The yearbook offers ads for the parents of seniors, the newspaper and football programs offer ad space for profit, and uniforms are bought by the participant. Fundraisers are typically held inside the school where students are raising money from students, such as candy-grams at holidays like Halloween or Valentine’s Day. Find a place you’d want to give to your child’s high school or your alma mater.

College / University / Technical Schools – Sometimes you cringle at the money you spent to attend a higher education program where you feel it was worth it or not. Then about 2 years after graduation they want to contact you to donate to the alumni association, your particular program, a dean’s or chancellor’s fund, or other divisions. I’d actually encourage you to join your alumni association if your school has one. Also give at least annually, and if your school is a public or state school check out if the division you’re giving to is a 501(c) which means matching by companies and/or tax deductions.

2000.07.17 - Model Picture 1- Before

One more way you might be able to give money to your schools is to check with your human resources about getting paid to volunteer. My husband’s employer will pay an organization for each hour he volunteers for them. I don’t remember the pay rate, but he has to work 10+ hours within the year. Also the “deal” is non-transferable, so I can’t volunteer in his place.

Giving back to education is paying it forward for your children.

About Summer:

Summer is very active in our Local MOMS Club chapter, she is the mother of two adorable active boys, and is always thinking of ways to help others. She is a friend, a wife, and always busy as all mommies are. She is very active on Facebook, addicted to Geocaching and very interested in organic and green living while cooking up a storm.

Filed Under: charity, Summer Tagged With: charity, Co-op, college, elementary school, give to school, high school, school, season of giving, Toddler group, university

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