Whether you’re saving for one child or six, use these saving strategies to reach your education savings targets.
Start Early. When you’re managing a budget for a growing family, saving for the cost of future education can be daunting. Let time work on your side by setting aside as much as you can while your children are young. Starting early allows you to make modest contributions that can benefit from compounding interest over time.
Make a Plan. Setting an education savings goal can help you stay on target and on track. To make a plan, start with an online savings calculator. Many 529 plans have state-specific calculators that give you an estimate of what future education expenses will be at your dream college or university. The number you see may feel unattainable, but saving early, often, and strategically can be a great way to reach your goal.
Save Systematically. Whether you set up recurring contributions from a bank or payroll direct deposit, saving systematically is an automated way to build your savings quickly. Consider directly depositing $150 per pay period into your 529 account. After 26 pay periods in a calendar year, you would have nearly $4,000 in contributions to your 529 account.
Adjust as Needed. At least once a year, take a moment to review your contributions, your investment growth, and the needs of your family, and adjust your automatic contributions. Increasing automatically is an option for many 529 plans, but it’s never a bad idea to take the opportunity on 529 Day or during college savings month to boost your contributions. It’s often said that when your child reaches their next milestone (out of diapers, out of daycare, etc.), it’s a good time to increase the contribution amount. Whatever works best for your family, be sure to assess and adjust.
Why this Matters: Funding post-secondary education can seem far away when your children are still in diapers, but 18 years can fly by. Making a plan and sticking to it can accelerate your education savings and relieve the financial burden of post-secondary education when the time comes, especially when you are saving for more than one beneficiary.
About the author: Lael M. Oldmixon, M.Ed. is the Executive Director of the Education Trust of Alaska, which offers Alaska’s three 529 plans, Alaska 529, the T. Rowe Price College Savings Plan, and the John Hancock Freedom 529. She lives in Alaska with her spouse, two children, and two dogs.
Photo courtesy of Lael Oldmixon. Pictured are her two beneficiaries, who are no longer this small.