This post is sponsored by Virginia529. However, all thoughts and opinions are my own.
My husband and I have always been pretty financially savvy and good at managing our finances to buy our home, cars, and save for retirement.
Once we had children, we realized that there are new financial responsibilities and goals that we need to set. Ones that will not only help our family, but that will also give our children a head start in planning their own future.
The rising cost and burden of education
Do you have any idea how much student loan debt the average post-grad carries? According to the Wall Street Journal, the student loan debt average per person is $37,000! That even seems on the low-end compared to many young adults that I know.
Our children will barely be able to pay off their loans by the time their own children enter college at that rate, much less own a home, car, or raise a family. I was lucky enough to pay off my student loans within 7 years of graduating, but many post-grads are not this lucky.
Setting a new financial goal for your children
One important financial goal that we have for our future is to help our children pay for their education the best way that we can. However, the task of saving for something that seems so far away is a tough one.
When you have other financial priorities like paying a mortgage, electricity, and putting food on the table, investing in higher education 18 years from now seems to get put on the back burner. It’s not a good idea to neglect your own present finances or put yourself in a tough financial situation to start saving for your future.
The most important thing is to make sure that you have the following accomplished before you start saving for college:
- Actively paying off any accumulated, high-interest debt (credit cards, student loans, vehicles).
- Have an emergency fund or savings account with 3-6 months’ worth of liquid money to cover necessary everyday expenses, in case of any unforeseen circumstances.
- Putting at least 10-15% of your income into a retirement account. An employer-sponsored retirement account (meeting any contribution that they match) will be your best option.
After those are completed, if you have a few extra dollars a month, give your child the gift of their future financial well-being.
Related Post: Top 4 Places to Invest Your Extra Money
What’s the best way to start saving for college?
Just a couple months after my first daughter was born, we opened an Invest529 account for her to get her college savings started early. We had the money to put aside now so we figured that we should do it while we can.
Invest529 is a simple way to start saving and investing for your child’s future. Invest529 is a highly rated, tax-advantaged program that helps you save for higher education and job training.
If you choose to put money away for your child’s future, you want to make sure that money will be invested and grow for the next 18 years. Just simply placing it in a savings account would actually lose money. This is a great way to help your child down the road when paying for school.
In simple terms: You put money into an Invest529 account now and as much as you can afford for the next 18 years. This money will grow as your child ages. Once they are ready to start college, you can withdraw it tax-free for qualified higher educational purposes.
You don’t have to worry that they may not get to use it if they don’t enroll in a specific college. It can be used for schools nationwide or overseas, public or private universities, graduate, vocational, or private schools, and even religious K-12 schools if you need it before college. It can also be used not only for tuition, but room & board, technology, books, and other supplies or fees.
Here are the reasons that we chose to use an Invest529 account as our primary means to save for our children’s college expenses.
Advantages of an Invest529 account:
You can open an account with as little as $25.
There is no need to invest a ton of money to get started. Just opening with $25 gets your account open and an early start at saving for your child’s future.
You can save at your own pace.
You are able to customize your savings strategy to fit your family’s needs. You can decide how much or how little you want to contribute weekly, monthly, or as you have money available to put aside.
You can contribute one year and not the next if you don’t feel that you have the extra funds at that time. Your savings plan is tailored to you!
Enjoy tax-free gains and advantages
You are not taxed on any earnings when you withdraw them to use for educational expenses. There are no withdrawal fees or penalties if used for this purpose.
Your money is invested wisely
You have the choice of customizing your own investment options with more than 20 choices based on the level of risk you’re comfortable with.
The money is always yours
One of the biggest concerns may be, what if my child doesn’t end up pursuing higher education or college? That was definitely one of our worries before we did our research. However, you can rest assured that if plans change the money you invested is always yours.
If a child doesn’t end up using it for college expenses, it can be passed down to a younger child for their education expenses. It can also be passed to other family members to use- cousins, stepbrothers, etc- without penalty if used for qualified educational purposes.
As mentioned before, it can be used for schools nationwide or overseas, public or private universities, graduate, vocational, or private schools, and even religious K-12 schools if you need it before college. It can also be used, not only for tuition, but room & board, technology, books, and other supplies or fees for anyone who it gets passed on to.
If for some reason your child doesn’t need the 529 plan to pay for their education educational opportunities (for example they receive a full scholarship, or enlist in the military enlistment, etc.), you can withdraw it, but you will pay the taxes and fees on earnings.
So many options for plans
Each state has its own 529 plan, however you don’t have to stick with your own state. Invest529 is administered by Virginia529, the nation’s largest 529 plan. But this is a national program open to all families.The state’s plan that you choose doesn’t have anything to do with where you live, work, or even where your child ends up going to college.
Each state differs in the benefits and advantages that they offer so you can choose what fits your family’s needs the best. Some states offer state-level tax incentives if you live or work in that state, while others do not so explore different plans and see which option is right for you.
Check out more benefits of a 529 account here.
When should you start saving for college?
It is never too early or too late to start saving for college. We started an Invest529 account a few months after our daughter was born. However, if your child is 5, 10, or even 15, there are still so many benefits to saving for their future.
If you start investing $2K a year during your child’s first year of life, they will have enough to cover approximately half of a 4 year college education. If you can’t save that much, remember saving a little bit is better than saving nothing at all.
How to maximize your savings
For some, saving extra each month can be very difficult. It takes discipline, education and motivation to know where your money should go and how to spend it properly.
Here are some ways that you can maximize the funds that you want to set aside for your child’s education.
Set a goal
If you’re really set on giving your child a future that is financially secure, make an achievable goal that you and your partner can agree upon. Calculate how much you want to save per year to give your child a nice cushion for when they get older.
Remember, you don’t need to feel like you have to save their entire tuition, but whatever you can manage will help them immensely! Whether it’s 1 year’s tuition or even just to cover the cost of books, it will all be so appreciated and you will be grateful when you realize how much you saved throughout their childhood.
Take advantage of holidays and birthdays
Gift givers love to ask for wish lists from your child. Instead of receiving more toys and clothes that just clutter your home, direct them to make a deposit in your child’s Invest529 account.
It’s super easy for a loved one to purchase a gift card straight from retail locations like Walmart.com or Target or even make a direct deposit through your personal link.
Start an automatic payroll deduction
You can set a contribution to come out directly from your paycheck. The payment can be as little or as much as you want it to be. It’s helpful to set that money aside before you even see it in order to maximize your savings.
You may need to make sacrifices to save for this purpose. Instead of buying that cup of coffee every morning, think about putting the $2.50 a day into your child’s college account. Instead of buying him that new video game that he’s been begging for, put that money into the account.
By making little sacrifices each month, you will find that you may just have those extra dollars to invest in your child’s future.
Use bonuses, raises, or tax refunds to help fund the account
At certain points in the year, you may notice that you have a little extra money in your pocket. You may have just gotten a bonus, raise, or that nice little tax refund that comes every April.
You may get to stop paying for daycare because your child is starting public school or you no longer have a monthly cable bill because you cut cable. When you find yourself in this situation, take that extra money and put it directly into college savings.
This can really help you save without your checking account even feeling it!
Related Post: 12 Best Tips for Saving Money Wisely
Although the thought of saving for college seems like an impossible goal with all your other current expenses, it is a very achievable one! Set your mind to it and you may surprise yourself with how much you have saved when the day comes.
Read more about the benefits of a 529 account here.
Virginia529 is sponsoring a sweepstakes of a $1000 contribution to a new or existing Invest529 account. The Sweepstakes began November 12, 2019 and ends December 18, 2019 (Sweepstakes Term). During the Sweepstakes Term there is one way to enter: Online by visiting Invest529.com/offer during the Sweepstakes Term, completing the online entry form and submitting it to receive one (1) entry into the Sweepstakes.
This is a sponsored blog post by Virginia529. However, all thoughts and opinions are my own.