Saving for your baby is something that is never too early to start and with the cost of a college education getting increasingly more expensive, the more time you give yourself, the better. More often than not, a lack of action isn't because you don't want to save for your baby, but because you don't know where to start or what you should be doing which is why this guide was created.
Set up a 529 plan – The very first thing you should do is set up a 529 plan. There are many options for setting up a college plan for your child including a basic savings account but the 529 plan is a personal favorite of mine for many reasons. One of the best benefits of a 529 plan is that you don’t have easy access to the money. Not having easy access to the money is a good thing because if “something comes up” and you need the money, it will take time to get to the money in the 529 plan and effort, making it not the ideal account to take money from and giving it time to grow. Additionally, 529 plans are invested for you which takes a lot of the guesswork out of how to invest the money and gives you some additional growth in the form of stock market returns. 529 plans can also be used to fund alternate forms of education besides traditional colleges.
Start earlier rather than later – When you hear some of the large numbers you’ll need to save for college, it can be a very daunting task. The good news is that if you start as soon as your baby is born, you have up to 18 years to do it and time on your side! Starting earlier rather than later also allows you to take advantage of the power of compound interest. Compounding is the act of your interest earning interest. Even if you’re reading this and you no longer have a newborn, that doesn’t mean that it’s too late and you can’t start saving. Starting sooner rather than later works no matter how old your child is and even if you have a child that is in their senior year of High School, a year of savings is better than nothing at all.
Do what you can – Something is better than nothing. Often, our brains are trained to reach for the stars and we have an all or nothing mentality. I would argue that 100 dollars saved every year over an 18 year period is better than nothing saved over that same time period. It may be that at the end of the day, you’re only able to save enough for one or two years of college or maybe you’ll only be able to save up enough for books each year, but its something that will contribute to the your child’s financial well-being in college and take some of the financial responsibility off of their shoulders. The other good thing about saving anything is that it gets you into the habit of saving. Maybe you can only save $10 a month to start, but at some point in time, that $10 may become $20 and that $20 may grow to $50 a month.
Set goals – Human beings are goal oriented people and hard-wired to attain goals. If you set a goal, there’s a chance that you won’t hit your goal, but I would argue that if you don’t have a goal at all, you definitely won’t hit your goal. If you have a goal set, you’re more likely to try to plan to achieve it. Setting a goal will help you plan accordingly to meet those goals. If you set a goal to save $1,000 a year, you can work back from that number to figure out how much you need to save monthly or by paycheck to meet that goal.
Get help – While toys are great, let's be honest, they don’t last forever and at some point in time your child will lose interest in their toys or outgrow them. So for birthdays, holidays and baby showers why not give people the option to add to your child’s college plan instead or in addition to. You’re always going to have friends and family members that regardless of what you ask for, buys you toys and clothing but for those that ask you what to get your child, ask them to contribute to their college plan in lieu of other gifts.
Have a plan – Make a plan about you’re capable of doing and what you actually want to do and discuss it with anyone who will be helping you with the plan whether it be a partner or a parent. In order to succeed in most things in life, having a plan in place is the first step. Maybe your plan includes paying for tuition but not room and board or maybe it’s paying for undergraduate school but not graduate school or perhaps you’ll pay for in-state tuition but not out of state tuition. Whatever plan you decide on, think about it in advance, before your child gets to the stage where they’re picking a college! Once your child gets to college age, talk openly to them about what you plan on doing so that their expectations are in line with your plans.
Don’t be afraid of loans and leverage scholarships and grants – Everyone is not eligible for grants, but if you are, seek out as many as possible! Scholarships are extremely underutilized. They take a little bit more work to attain but every dollar counts and applying for as many scholarships as possible will only help alleviate any debt you may have to take. Loans get a bad reputation, but just like with so many things, sometimes there are bad practices that can cause something to get a bad reputation. Despite their bad reputation sometimes they are the only option that people have and the good thing about them is that they have the lowest interest rates of any other loans available to you. In order to have good practices with loans, you should never take out more that is absolutely needed or more than you or your child can feasibly payback.
You have taken the first step to getting an early start to saving for your child's education by reading this! The next step is to take action. Whether you choose to do one or all, set a goal to do something and stick to it. Good luck and happy saving!