Education in America is expensive, and tuition prices have been climbing for years. It is possible to save for your child’s college education, even if your budget is tight.
Here's how to start making a plan:
How much should I be saving for my children's college education?
Well, unfortunately there's no magic number there. The total amount your kids will need for college depends on several factors, such as whether they'll go to school in-state or out of state, or to a public or private school, and whether they get scholarships or grants. Those are a lot of variables to try and solve for.
The 3 things you should ask before saving for children's education:
The one thing we do know is that we parents want to retire someday. So before you start saving for college, it's important to ask yourself three things.
- Am I actively paying down my debts?
- Am I building my emergency savings?
- Am I saving at least 15% of my salary for retirement?
If you can say "yes" to all of these questions, then you can feel comfortable investing the extra income you have at the end of each month, after paying all of your bills and making these contributions to emergency savings and retirement.
Now, if you answered no to any of these questions, you're not alone. But it is important to plan wisely. There are other ways to help your kids cover the cost of college education, so don't put too much pressure on yourself to have the cash upfront.
Other options to save for education:
Focus on solidifying your financial foundation first and only save for college when your cash flow permits. You'll have options when your kid is ready to go to school, like helping them pay off student loans or taking out loans for them. But if you are not prepared for retirement, that's not as easy of a fix.