Getting Started with Saving

By Michele Blandino

It’s no secret that a college education is expensive. With the average annual price tag of $20,000 for tuition and fees, private colleges and universities are increasingly becoming out of reach for many. With average annual costs of $4,500, paying for public universities and colleges is also a daunting proposition.

With these costs expected to escalate each year, many students and their families turn to financial aid and scholarships to help finance their education. Because so many more people are hoping to get a piece of the financial aid pie, however, the competition for these dollars is becoming increasingly intense.

Unfortunately, many people do not understand the importance of starting to save for college early in their child’s life. While it is admittedly difficult to do so, there are a number of things you can do to set aside a little extra money each month. Here is a look at some of the things you can do:

• Make a Plan: Like most things, in order for a savings plan to be successful, you need to identify a goal. Rather than promising to put away an unspecified amount of money each year, establish a monetary goal. How you meet that goal will depend on your particular financial circumstances; some people find it easiest to save a little bit each week while others will find it easier to use a cash windfall such as an income tax return check to meet the goal. Likewise, consider putting any unexpected cash inflows such as an inheritance, lottery or casino winnings, or annual bonus directly into your college savings account.
• Keep the Money Separate: By establishing a distinct savings account, you will be less likely to be tempted to raid it to help finance vacations, new cars or other big-ticket items. Keeping the money separate will also make it easier for you to track your progress.
• Re-direct Completed Payments: If you have finished making payments on a car, credit card or other item, re-direct the payment you would normally make to your college savings account. For example, suppose you have just finished paying off your car. Since you probably have been making that car payment for at least three years, it has become part of your monthly budget. Applying that money toward your college savings goal will easily help you meet, or even exceed, your goal.
• Review Your Current Spending: Take a good long look at how you currently spend your money. Are there things you can cut back on? Many people forego luxuries such as premium cable service, restaurant dinners, take-out meals and non-essential cell phone usage in an attempt to increase their savings.
• Ask Your Kids to Contribute: As soon as your child starts working, whether it is as a babysitter for neighborhood kids or a regular after-school job, insist that a pre-determined percentage be put into the college savings account. For many kids, having a financial stake in their education will incite them to do their best once they arrive on campus.

Remember, the key to saving for college is to start early – preferably before your child’s first birthday. With regular deposits and the addition of interest, your savings will steadily grow over time.