A college education is almost a requirement these days in order to break into most well-paying jobs (unless your child is itching to start the next great tech company). However, the cost is steep! According to Collegedata.com, the average cost for a public, in-state college was $23,410 for the 2014-2015 year and $46,272 for a moderate private college. If your child has his or her eyes on a master or a doctorate, the price tag will soar even higher.
Though the cost of college may feel intimidating, there are ways that you can begin saving now to help cover or at least defray some of the costs. Here are four great tips to help get your child through even the most prestigious and expensive universities without earning a mountain of debt alongside their diploma:
Start Investing Now
You know when your child will be of age to go to college. According to Collegeboard.org, the average inflation-adjusted rate of college costs for a public, four-year university between 2004 and 2015 increased 3.5% a year. That rate of increase was 2.2% for private universities. Using this information, you can roughly guesstimate the amount you’ll need to have saved for each of your children when they are ready to head to college.
Now, start saving. That’s right. Call up your financial advisor and start socking money away. (Learn whether bonds are safer than stocks?) The sooner you begin saving, the more time you’ll have for compound interest to kick in and help supercharge your savings. If you’re tempted to postpone starting an investment program, run your savings numbers again, assuming you wait a five years before investing. The increase in the amount you’ll have to save each year in order to meet your goal will be pretty shocking. Don’t wait!
Use All the Tools Available
When you calculate how much college will likely cost for your child, especially if you have several children, you may wonder how in the world you can possibly save for it all. Don’t worry, you’ll get some help in the form of financial aid and loans. Obviously, the less you have to rely on loans, the better, but at least you know they will be an option to help supplement what you have saved when the time comes.
Try to Pay Off Your Mortgage Early
If you’re like most Americans, your largest monthly cost is your mortgage payment. You also probably know that if you have a 30-year standard rate mortgage, by the time you write the final check, you will have possibly paid double or triple (or more) the original cost of your house due to all the interest. You could save a HUGE amount on interest by switching to a 15-year standard rate mortgage, especially with today’s incredibly low interest rates.
If your children are babies, then you could have your house paid off by the time they are ready to enter college, thus allowing you to seamlessly shift the same amount you would have been spending on mortgage payments toward paying for college. It will also be nice knowing all that interest that would have just gone into the pockets of your mortgage company are now going toward your child’s college education.
Expect Your Child to Chip In
We all would love to be able to pay for our child’s entire college costs so they could start life without debt; however, there’s something to be said for encouraging your child to take some of the financial responsibility for their education. When they are helping to pay for the cost of their college, they are more likely to appreciate the value of their education and to take it much more seriously.
The most attractive loans are offered to students, so one idea is to encourage your child to take out student loans, which you can help pay off. Since student loans don’t come due until your child graduates, this will give you a couple more years to save.
You may also consider asking your child to cover a specific percentage of their college costs or simply to cover the cost of their books and room and board while you take care of tuition. This is actually a great way to teach your children how to begin managing their finances and taking on financial responsibilities as they grow into mature adults.
For more information about saving for college, read through the rest of our great saving and investing article archives just for women.