Higher living costs have been a reality for many people across the U.S. throughout the past decade, and many families have adapted their budgets to account for rising prices. Higher education institutions have not been exempt from this, and many colleges and universities have increased their admission prices to combat these rising costs. The College Board reported an over $6,000 increase in average annual tuition costs at public four-year colleges and universities, with costs jumping from $4,900 per year to $11,000 per year over the past three decades.
While having a degree may not guarantee employment, higher education is still vital for securing jobs in many industries. Even in fields where a degree is not required to start a career, getting
a degree in that area can be beneficial for personal advancement and development. Parents with children who plan to attend college can use the following recommendations to start saving for higher education or continue building those savings.
View the cost of college as an investment
Having a varied investment portfolio tends to be a good thing, so look at tuition prices for public and private four-year universities, as well as those for community colleges, trade schools and specialized institutions. From there, parents can choose to set the average price tag as their savings goal or plan to start saving for the most expensive price tag they encountered. For those who are starting to save later in their child’s life, it might be better to aim to save up enough to cover the cost for their first two years of school, then work on saving for the last two as they make decisions on where they want to continue their education. There’s no right or wrong method to save for your child’s tuition, but it is important to choose the most effective method for your family and your financial situation.
Consider different approaches to saving
Starting a savings account for your child and adding to it as they grow up is probably the most common way people can approach saving for college. This can go one of two ways, though: either the parents can add to the savings account as the child grows up to create a college tuition nest egg or the parents can have their children add to the savings account as they grow up. For kids, this could look like dedicating part of an allowance to savings, putting birthday or Christmas money in savings or adding money from paychecks to this savings account. Either of these approaches will work, but the second might work better for parents and children who are getting a later start on saving for higher education. A less common and more complicated option is establishing a trust fund, which requires parents or grandparents to seek advice from wealth management professionals. Trust funds often come with conditions, though, so it might be better to stick to more traditional tuition savings methods. If you are unsure which method would work best for your situation, you may want to consult a trusted financial advisor.
Build higher education savings in a variety of ways
The key is to plan ahead as far in advance as you can. If you were able to start saving and planning for your child’s tuition costs before they were born, that is great. If you were unable to start until they were in fourth grade, that works, too. In both cases, parents need to stay consistent in adding to their savings accounts, and both sets of parents are helping their children pay for college. Parents may also want to look for and choose savings accounts that earn interest at a higher rate than a normal savings account. As your kids enter high school, encourage them to start looking at colleges and scholarships they might be interested in. As they approach their junior year of college, help your children apply for scholarships and fill out college applications. Lower-income families can also fill out the Free Application for Federal Student Aid, or FAFSA, and explore related programs and scholarships. Be dedicated and supportive in helping your kids complete the college and scholarship application process, and celebrate with them as their hard work pays off.
Bonus: Consider saving for additional costs
Most college students will need a laptop, dorm furniture, general school supplies and textbooks. These can come with hefty price tags as well, so create a separate plan to save for these items. That might look like having your children put money earned from after school or summer jobs in a dedicated savings account, gifting them these items for birthdays or holidays or setting aside extra money in their tuition savings account to cover the cost of these items. Proactively accounting for extra costs can help alleviate stress as you help your child transition from high school to college.
Higher education can be costly but is still essential in today’s job market. The earlier families can start saving for college, the better, but even putting back enough money to cover the cost of one to two years at a community college can help young adults earn the degrees and get the experience they need to be successful.
Kristy Roach is a community development mortgage lender for Arvest Bank – Springfield Region. She can be reached at kroach1@arvest.com.
This article originally appeared on Springfield News-Leader: Planning for higher education costs and building college savings
