During virtual meetups with friends, the conversation inevitably veers towards how we have more “free” time, yet we’re doing less with it. “With no 60-minute commute, I should be working out,” we’ll say. Or “Why isn’t my house clean?” And, of course: “I’m not eating out as much, I should be starting a college savings plan.”
With 2021 finally here, it could be the perfect time to get a fresh start on some new goals. I dusted off the treadmill and put away the holiday decorations. Now it’s time to tackle a money-saving plan. I decided to take my eating-out budget and do something productive with it, like helping my kids save for life after high school. For a little motivation, I turned to the experts for advice.
1. Start small by using “found money.”
Remember that saving even a little every month can help, says Tim Gorrell, executive director of the Ohio Tuition Trust Authority, which manages Ohio’s 529 Plan. To do this, he suggests seeking out “found dollars.” What are those, you ask? If you’re staying home more, it might mean money that you’re not using to grab coffee each morning—or, in my case, money we’re not spending on workday lunches. Kids’ sports, extracurriculars and after-school care could be other areas. Consider if any of these activities have gone away and how you can reallocate those funds to savings. “The key is to start somewhere. No matter how close your teen is to the end of high school, there’s still time to save,” Gorrell says. “Even contributing $25 a month will add up.”
2. Automate payments for best success.
Assuming you can find extra dollars, set those funds up to save automatically. Some employers offer direct deposit for 529 savings plans—much like payroll deduction programs for 401(k) plans. Most 529 programs are designed to help families invest in tax-advantaged 529 plans that can then be used for educational expenses after high school. “Set it on autopilot, and you’re more likely to save,” Gorrell suggests. (If only exercising and eating right could be set on autopilot!)
3. Talk through your plans—the sooner, the better.
With uncertainty still on the horizon, many families are re-assessing their teens’ plans for life after high school. Gorrell says that he hears from families now looking at online opportunities, community colleges, technical schools, apprenticeships or even taking a gap year. The good news is that a 529 plan can be used for many post-secondary options, not just a traditional four-year college or university.
As Gorrell concludes, “There’s no one right answer. I think the underlying point is that parents and students should have the conversation now and map out all of the options. What’s the best choice? How much is that choice going to cost? The sooner you have that conversation, the better you can plan accordingly to save towards those goals.”