5 College Savings Tips

http://www.savingforcollege.com/articles/5_college_savings_tips

When I started saving for college for my kids, my oldest was a gap-toothed seven-year old just starting second grade. His brother was a five-year-old in preschool five days a week. Today, they are both young men and the oldest is not only going to graduate from college in May, but will be married shortly thereafter.

As I look back on those years, I’ve been thinking about what I did right – and what I wish I could do over again – in regard to saving for college. In that spirit, I present five college savings tips for those of you who are saving for your own kids or who have a do-over chance in terms of saving for your grandkids.

1. Start to save early. Given my family situation, it was pretty impossible for us to start saving earlier for college because when the kids were very little, my then-spouse was in medical school and I wasn’t working. But all other things being equal, the earlier you start saving, the longer you have for your savings to grow.

2. Gradually increase how much you save. This worked well for us – as our family income increased, we were able to save more for each child. Because we started later for our oldest, I put more aside for him than the youngest. There was a decent amount saved for the oldest when he started college in 2007 and even more for the youngest, who started this year due to compounding of interest and returns between ages five and 19.

3. Go with a conservative age-based plan. When I started investing with a 529 plan in 2001, these plans were in their infancy. Fortunately, I hooked up with a solid plan and selected one of their age-based alternatives that got more conservative as the child got older and closer to college age. That really paid off, as both of my kids had most of their 529-plan money in cash and fixed income when the financial crisis hit in 2008. If I had been more aggressive, those funds could have been decimated, which would have been a disaster. It pays to emphasize principal preservation in college savings account investing.

4. Keep saving even when times are tough. After I separated from my husband in 2005, I didn’t have a lot of money for savings. There was no way I could afford to match what we had been saving together in terms of college savings. But I did keep putting $50 a month in towards our youngest son’s account and that really paid off and grew during the next six years. It wasn’t a lot of money, but it made a difference in the overall amount we have now to put towards college.

5. Look for scholarships. This is something we didn’t do that I wish we had. I didn’t realize that kids aren’t really that self-motivated when it comes to looking for financial support for college, mainly because they don’t know how to go about it. In retrospect, I should have taken more of a leading role in looking for scholarships, grants and other financial aid for my kids.