written by: Andrea Glick•edited by: Amanda Grove•updated: 7/31/2010
College is pricey necessity and deciding how to pay for it can be difficult. Here we find out, what is the best way to save for college, which is specific to each person's situation. This includes the best long-term ways to save money and the best short-term ways to save.
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Ways to Save for College
It’s no secret that attending college is a must if you want a competitive edge. Another well-known fact is that college isn’t cheap and it isn’t easy.
Getting into college takes hard work and dedication. Paying for college is the same way. Without time and proper planning, paying for college can seem like a daunting task but it doesn’t have to be. If scholarships and loans aren’t an option, we’ll show you what are the best ways to save for college.
There are many ways to save from starting early and slowly saving up to working hard and saving quickly. Then, you have to decide if you want to save alone or if you want to get the government involved through something like a 529 plan.
According to College Savings Plans Network (CSPN), a 529 plan is a “tax-advantaged investment plan designed to encourage saving for the future higher education expenses of a designated beneficiary.
There are two different kinds of 529 plans:
Prepaid tuition plans (a.k.a. guaranteed savings plans)- These plans are available in 13 states and allow you to pre-purchase tuition based on the current rates. The tuition is then used when the beneficiary is in college.
Savings plans- These plans are available through your state and are based on the market performance of whatever investment you’re interested in (i.e. mutual funds.)
These government-investment savings plans are best for the long term. If you’re looking to save for college quickly, there are other ways of doing so.
Sometimes continuing education isn’t planned since childhood. This doesn’t mean that it’s impossible.
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The earlier you start the better- If you invest $100 a month for 18 years, that will yield $48,000.
You don't have to save for the entire cost of school- There are countless scholarships and grants available to help with paying for college.
529 plans are a great option- Not only are there no income and age limitations on 529s but they are also tax-free.
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Whether it's through 529 plans or personal savings plans, this guide will help you figure out the best way to save for college. There are many ways to save money for college, but deciding what is your personal best savings plan for college is important.
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Save for College, the Best Way
If your college fund wasn’t built with the government since you were young, here are three easy steps:
Know your total amount needed- Set an honest total for what you’ll need to save. Remember to keep in mind living expenses, books and room and board, along with tuition. It’s better to overestimate than underestimate. Especially considering that college tuitions tend to increase each year.
Budget your money- After you’ve decided how much money you need to save, look at your timeline. How long do you have before this money will need to be available? Two years? 18 years?
Now, look at your total amount that you need. Do some simple math to see how much you’ll need to put away to achieve your goal. Be sure that this is reasonable. If you’re trying to raise $20,000 in two years and your salary doesn’t permit that, then it’s time to re-adjust.
Have a savings account- While it’s pretty easy to make money, it can be incredibly difficult for some people to save money. This is why a savings account is important.
This is the most important step because this will either make or break you. You’ve already determined what portion of your income will need to be saved each month. That was the easy part. The hard part is actually putting it into that savings account and then actually not touching it.
Also, next time you’re in the bank making a deposit, actually sit and speak with a banker. They know all about the best rates that your bank is offering on CDs and other interest-accruing savings options.
“Save" can be a four-letter word for many people but when college is in the picture then it’s inevitable. When learning, what is the best way to save for college, know the facts about what you need and know your options. Working hard and saving for your college education is well worth it.
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College Savings Plans Network (CSPN): http://www.collegesavings.org/index.aspx