An article by BudgetQueen
Your kids are getting older and suddenly you panic because you don’t have any money saved up for college. Instead of giving you a sliding scale of how much you need to donate right now and which plan, I want to ask you to ask yourself a few important questions to make sure your savings plan matches your lifestyle.
Most of the time people have the best of intentions about savings and then things come up. Like daycare, sports, home repairs, falling on hard times, vacations, etc. Now as the kid(s) are talking about college, you want to encourage them, but you are worried that you can’t support them.
Relax just a minute…let’s take a realistic view of what can be done….
First of all, life is expensive. The fact that you got your kid this far and he/she is a great human being is commendable. Secondly, most often your kid doesn’t know what he or she wants to do or where they even want to go. Third, your kid may already have developed some of the skills it takes to get a scholarship. Fourth, there are some great things that will help you along the way.
Things to consider first
Before starting with a college education fund of any kind, look at your finances and determine if it is a wise investment right now. You feel like you are pressured into acting quickly because the longer you go on, the more you will have to pay.
But, it is important to decide if you can afford to do it right now. Sometimes you may not realize that by adding just one more bill, you start putting more on credit cards. If so, you are not ready to invest right now. Make sure that your savings is built up and your debt is down. Have you started a retirement program for yourself? That is just as important, if not more so, than a saving plan for the two-year-old.
No worries though – there is still more that you can do to help your kid’s future while you make sure you are ready to invest. Things may be different in six months or a year. If saving up for your kid’s school is what you really want to do, give yourself a deadline to start it up such as his or her birthday or the end of the year.
There is really no hard and fast rule
You may be confused about the in-state, education fund (529 Plan) because you are not sure that your kid will go to school in your state. You heard about the new scholarship program that took care of life insurance when your kid was a baby, but you wonder if it will be enough. Some parents choose whole life insurance. Others save with Money market accounts with a high interest rate.
The answer is that there really is no hard and fast rule which one is the best. Some work best for some and others work best for others. My husband and I were a little panicked until we decided to dedicate any stock we received as bonuses at work. Once we did that, and as our stock built, our worries melted away. If you have dedicated money toward an education fund, stick with it.
Prepare your kid
Emotionally preparing your kid is some of the best prep he or she can have.
Start talking about your good experiences in college and what a change it will be (don’t tell them about painting your body red and black and waking up in the middle of the student union the next day not knowing what happened – they don’t need to know that yet). Tell them that they will have to work hard and you have expectations if you are going to help them.
Start talking to your kid about his or her responsibility about getting good grades and trying hard. Let the kid know ahead of time that they may have to take out loans that will have to be repaid with interest. Make sure to let them know that the original amount can quickly grow in size depending on how long it takes him or her to pay it back. It can even double or they could end up paying on it for ten+ years. Discuss with them that they may need to put away a portion of the money away from the after school job. Lastly, they will probably have to work while they go to school.
Do you want to know the surprising reaction from most of this? He or she wants to be responsible. He or she starts talking about jobs and school and taking control of his or her own future.
Please read “Help! I don’t have any money saved up for my kid’s college: Part Two”