How to Save for College (And Not Just Tuition) | Financial Planning For College

How to Save for College (And Not Just Tuition)

It’s no secret that college is expensive, and tuition is just the beginning. The cost of college is rising, too—some say as much as a 6.5% annual increase for public universities, and a 4.5% annual increase for private colleges. Suffice it to say: You need a plan to tackle the costs.

Like any worthwhile investment, it’s important to decide what’s right for you, whether you’re paying for college yourself or helping someone else (like your child) pay for their education. There are lots of financial aid options, but it’s wise to consider all the costs before you factor financial aid into the plan. Here are some tips to help you prepare for the expenses that go along with a college education.

Start a 529 plan

Saving for college feels even better when the investment strategy helps you confront (and diminish) the impact of rising costs, because let’s face it—rising costs don’t feel good. A 529 investment plan lets you take advantage of current prices and offers tax advantages as you save for future education costs. A 529 investment plan is available as a prepaid tuition plan or an education savings plan.

Prepaid tuition plans allow you to buy credits at today’s prices which can then be applied towards future tuition and other mandatory fees at participating colleges and universities (usually public and in-state). It’s worth noting that prepaid tuition plans don’t typically account for future room and board expenses at colleges and universities, and they don’t allow you to prepay for tuition for elementary and secondary schools.

Education savings plans, on the other hand, provide more flexibility. This 529 investment account allows you to save for future expenses at qualified colleges and universities, which includes room and board along with tuition and other mandatory fees. Withdrawals from your education savings plan can generally be used at any college or university—including international institutions. You can also use your education savings plans to pay up to $10,000 per year per child towards tuition at any public, private, or religious elementary or secondary school.  Flexible investments are one great way to build in options for your child’s future.

Open a savings account or add to the one you already have

From creating a budget to buying groceries (and toiletries) wholesale, there are lots of practical ways to build an investment that grows over time—and setting up a savings account has never been easier. It’s good to start by sitting down and forecasting college expenses with family members you’d make other major decisions with. Communication will help set expectations and inform a savings plan that is unique, adaptable, and tailored to the needs (and realities) of your family.

Saving for college can feel overwhelming, but like most challenges, a plan can prove to be a huge step towards achieving success. By practicing proactive communication, staying persistent when it comes to saving, and exploring tax-advantaged resources, you and your loved ones can chart a course that will lead to a more stress-free college experience. (Sorry, we can’t help you with homework.)