Kids & college: Leveraging 6 milestones to generate savings

http://www.savingforcollege.com/articles/kids-college-leveraging-6-milestones-to-generate-savings-1077

'How much should I be saving for college?' This is probably the question our college planning specialists get asked most, by parents of kids of every age. Whether just starting out with a newborn, juggling play dates, soccer practices or after-school pick-ups as kids get older, we hear from parents at every stage report that they're working hard to save, but not exactly sure if they're on track.

To help provide more perspective as parents navigate the saving and planning process, we developed the '2k Rule of Thumb' to use as a general guideline to during financial check-ins.

To figure out whether you're on the right track with your college savings strategy, multiply your child's age by $2,000. This is a simple formula that tells you how much should have saved to date if you're looking to cover 50% of the cost of attending a four-year public college from savings. If you're looking to send your kids to a more expensive school or cover more than half the cost, answering a few basic questions about your college goals using our interactive College Savings Calculator provides a tailored view of how your current college savings may measure up and how many more dollars need to be put aside to meet your individual goals.

Once parents have a better idea of what they should be saving, the question we often hear is 'how do I do it?' Like any other goal, saving for college is most effective if you make saving a habit and check in on your progress at regular intervals.

RELATED: Experts say this is how much you should save for college

Whether it's your child's first day of kindergarten or you recently earned a new promotion you've been working toward, here are six life events that could serve as trigger points for you to check in and ramp up college savings:

• Baby on board: As you plan for the new plus one in your family, you'll no doubt be taking a moment to evaluate your finances—but don't forget to include college savings in the mix. Set basic goals you can work toward throughout the years and consider opening a dedicated college savings account, such as a tax-advantaged 529 plan, to help your family save and stick to your financial goals. While it may seem early, college costs continue to rise and the sooner you start saving, the more time you have to invest and grow your savings.
• Cookies, cake and…college?: As you get the confetti ready for that birthday party or stir up the egg nog before the relatives come for Christmas, take these celebratory moments and consider them as opportunities for college gifting. For example, this past holiday, eight-in-ten parents said they'd welcome college contributions, but only a quarter said they've actually asked loved ones to consider gifting to their child's college fund. To help kick up those college savings, remember to take the initiative to ask.
• First day of kindergarten: As your little one heads to school for the very first time, you may have extra funds freed up from daycare expenses. By shifting your regular payments toward an investment goal like saving for college, socking away money for your child's education could be an easy transition—especially since your budget is already accustomed to that outflow. Whenever you reach a financial goal or eliminate an existing expense, whether it's daycare or even a car loan, it's a prime opportunity to redirect those dollars toward something else on your fiscal checklist. Still have a couple of big expenses to pay? Save while you spend by using a cash-back rewards card that contributes to your 529 account.

RELATED: How to select a 529 plan

• What's all the commotion about that promotion?: Those long hours at work finally paid off and you got yourself that promotion or bonus check. Certainly an event to celebrate. But also an opportunity to check-in on the status of your college nest egg and potentially carve off some of that extra income and increase your college contributions. With parents only on track to cover just 29 percent of their college funding goals by the time their child graduates from high school, it's important to have frequent fiscal check-ins to make sure you're on pace.
• 'The talk': No, we're not talking about that talk. We're talking about the financial one! As kids get older, having open, detailed discussions about how their college-related choices can impact their own financial future can help establish a base for their personal finance skills. In fact, according to Fidelity's 10th annual College Savings Indicator Study, 78 percent of families with older children (age 15+) who had conversations about how college can affect earning potential, job prospects and future student loan debt, took action to implement a savings strategy. What's more, recommending kids save some of their own hard-earned cash toward future college expenses can even get them more engaged (and accountable) in the college planning process.
• High school home stretch: Your child is one step closer to getting that diploma and as college looms toward the front of their minds, it's another good time for you to revisit how you've saved and invested your child's college savings. If you have a 529 college savings account or other dedicated college savings account, checking in on your investment strategy at regular intervals to ensure your savings are properly allocated, taking into account your tolerance for risk and the amount of time you have to save, is a smart move to help keep you informed and on track toward your goals. If you need a helping hand, consult with your 529 plan manager or other financial professional for support with any adjustments needed over time, and questions you may have about a future withdrawal strategy.

Whether you're just getting started or college tours are on your radar, setting up a plan and using milestones like these as reminders to check in on your college savings progress will help ensure you're staying on track toward saving for your child's college education and making those financial goals stick.

RELATED: Study reveals parents could have saved $20,000 more for college

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