When you are a parent, you have so many expenses that it can be hard to also think about setting aside money for your child’s college education. This is especially the case if your child is very young and you are still trying to set the wheels of your career in motion.
Either way, it’s important that you start with at least a little bit when your child is still young. This way you can start accruing interest on your initial investment and then start making larger contributions later on when your financial situation improves.
You just have to know how to organize your finances so that you can get started in the first place. Here is how to start saving for your child’s college education.
Create a Budget
If you really want to start a savings account for your child’s college education then you have to look at how much you will need to save before they turn eighteen. Of course, college tuition prices are always fluctuating, but you should just try to ballpark it a bit.
If your goal is to save $50,000 then you are going to have to figure out how many years you have left to save that money and then calculate how much money you will need to put aside each month in order to reach your goal. If you start to make more money at any point, then you should increase the amount of money that you contribute to the college fund monthly. The truth is that you never know how much college will end up costing your family by the time your child graduates and it is always better to have more money tucked away than needing to take out a college loan at the last minute.
Open a Roth IRA
One great way to start saving up money for your child is to put the money in a Roth IRA. This is technically a retirement fund, but you can also use it as a college fund if you like. With a Roth IRA, you take money that you have earned and already paid taxes on and put it aside in a low-risk stock account and withdraw the money whenever you like.
When you do withdraw the money you won’t have to pay taxes on it because they will have already been paid. You can also have both a 401(k) and a Roth IRA, so that when you do go to withdraw all that money, you still have your own retirement account to fall back on.
Cut at Least One Expense Out of Your Budget
One of the best ways to ensure that you will always have enough money to contribute to your child’s college account is by finding a daily expense you can afford to lose – like smoothies, coffee, frozen yogurt, or cigarettes – and instead, you can put that money into the college account. There’s a good chance that your child hasn’t told you anything specific, like that they want to earn NEC’s masters in forensic accounting, but so long as you get as much money saved as possible, you will be able to help them out tremendously when the time comes.