Parents of a child entering kindergarten in the fall of 2013 (the Class of 2026) can expect to pay an average of $44,161 a year for college, or a total of $176,646, for four years at an in-state public institution.
Developing a plan for saving for college is essential. The first step to helping your child get through college with minimal debt is to start early and make saving a priority. CNNMoney states, “Investing just $100 a month for 18 years will yield $48,000, assuming an 8 percent average annual return.”
Kids frequently receive monetary gifts for birthdays and holidays. This is an ideal opportunity to include an elementary school child in the process of saving for college. Have your child save 10 percent of every monetary gift, adding the money to a designated account for college.
Younger children may not understand the concept of college, which can make it difficult to generate enthusiasm for saving money for a “mysterious” cause. However parents can introduce the idea early-on in ways that are fun. If your family lives near a college, take advantage of community events that it may offer, such as free concerts, meet-and-greet sessions with athletes, and family-friendly programs sponsored by campus organizations. Each visit to a college can help a young mind to better understand an abstract concept such as college.
By sixth grade, kids may understand the concept of college but be less inclined to give up 10 percent of grandma’s birthday cash, especially when the newest video game or other hot item was just released. For a 12- or 13-year-old, college can seem like it’s eons away. However, continuing to contribute to a save-for-college fund during the middle school years is essential for reaching your goal.
Casual talk can go a long way with this age group. When watching your favorite college sports team on TV, stir your child’s imagination with a comment such as, “It could be a lot of fun to be there in the stands. That’s something you could do when you’re at college.” Use casual conversation as an easy segue for a brief conversation about the expense of college and the importance of saving for college.
Consider issuing a challenge to your middle-school child. At the start of sixth grade, for example, challenge him or her to save $10 a month, every month, until the end of eighth grade. After your child completes the challenge, match the amount saved and then put the total amount into the college fund. If a three-year challenge seems lengthy, issue the challenge in one-year increments. Make a big deal of the completed challenge by having a family celebration dinner.
High School: The final leg
Early in your child’s freshman year of high school start a serious talk about college. Assure your child that selecting a major isn’t necessary right now, but that continuing to save for college is as important as ever. Discuss how much money has been saved. Be upfront and state your financial limits.
A student interested in a college that’s beyond the family’s price range needs to be aware that the save-for-college fund will not be sufficient, and so he or she would need to borrow the difference and/or obtain scholarship money to help defray the difference. This is where online college calculators come in handy. Type in the potential amount to be borrowed and the interest rate to determine the monthly loan payment. After seeing the figure, your child may decide a loan payment of $600 or more a month may not be worth it if attending a less expensive school instead would mean zero debt upon graduation.
Juniors and seniors actively engaged in their college search should consider tuition and other costs in the selection process for their “perfect” school. At this age, they need to accept responsibility regarding their education, and future, and be fully invested in the financial aspects.
For generous parents who are able to pay for their child’s college education in full, it’s still important to include your child in the process as a life lesson about the importance of saving.
Ready to start saving for college? The Gerber Life College Plan1 is one way to do so, allowing you to put aside a fixed amount of money each month for a set period of time.
Learn more about how you and your child can start saving for college today.
1 Policy Form ICC09-PIE; Policy Form Series PIE-09