By Lael M. Oldmixon, Executive Director, Education Trust of Alaska
As a parent, envisioning your child’s future and education journey is natural. After all, don’t we all have big dreams for our children? Still, the 18-year time horizon leading up to college or post-high school training can feel simultaneously daunting and far enough away that procrastination may derail best intentions. Here are a few building blocks to help keep you on track and pointed toward your end goal.
Starting early and making regular contributions can simplify and make goals more attainable. College can be expensive, and it’s easy to feel overwhelmed by the amount you’ll need to save. My spouse and I utilized a cost calculator when our children were still in diapers. We realized that getting to our aspirational savings goal would cost the equivalent of an additional monthly mortgage payment (spoiler, that was extra money we didn’t have at the time). At that point, we reassessed the goal. We kept saving what we could, incrementally increasing as our kids graduated from diapers to big kid clothes, trikes to bikes, and little plastic sleds to skis. Soon, our oldest will enter high school. And because we’ve saved incrementally over the past 14 years while benefiting from compounding tax-free interest, the remaining amount we hope to save seems entirely manageable.
It’s not a new concept, but following the keep-it-simple approach, saving even small amounts systematically over a long period of time can add up in big ways, especially when using a 529 education savings plan. Systematic saving is a strategy where you set up automatic contributions to your 529 plan. This method is also known as “set and forget it.” This way, you won’t have to remember to make monthly contributions and are less likely to spend the money on other expenses. When our kids were little, my husband and I invited family members to support our savings goals by using Bill Pay from their bank for small $25 monthly contributions and gifting tools for birthday or holiday contributions.
Focus on the building blocks
Saving for your child’s college education is an important financial goal that requires careful planning and dedication. And it doesn’t have to be hard:
- Open a 529 education savings plan.
- Take advantage of systematic savings.
- Save what you can now and increase your contributions as you graduate from other expenses like diapers and daycare.
- Keep a long view of your goals.
- Small contributions can make a big difference over time.
- Start saving today, and you’ll be one step closer to achieving your goals.
The last bit of encouragement I’ll leave you with, dear reader, is that life can get in the way of the best-laid plans. So, don’t beat yourself up if you have to pull back on the amount or frequency of your contributions. Celebrate every penny saved and try to stay on course by saving something each month, even if it’s a little bit. It all adds up.
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.