If you’ve ever wondered, “How can I save money for college?” you’re not alone. In fact, many parents may still be paying off their own student loans, so finding room in the budget for their children’s college years can be challenging.
For single mom Kimberly Jarrell, saving for college meant looking for ideas that fit into her already-tight budget. She knew she needed to be smart—and not get overwhelmed. This fall, her daughter heads to college, and Jarrell feels good about what she’s accomplished, thanks to creativity on her part and some help from family members.
Jarrell’s uncle also chipped in, opening a dedicated college savings account—what’s known as a 529 plan—in her daughter’s name. 529 plans offer families a tax-advantaged way to save for college.
“Instead of my uncle buying her goofy presents for Christmas, he bought some of her college education. Best. Gift. Ever.”
4 Simple Savings Ideas
Like Jarrell, our family is also looking for ways to save for college that won’t take a huge bite out of our budget. Here are some simple college savings strategies anyone can try.
1. When one expense goes away, put it towards college.
When my husband paid off his car loan, we talked about what to do with the monthly payments we’d no longer need to make. We decided to put the money into our children’s 529 accounts, setting up automatic payments just like we had on the car loan.
“We call these ‘retiring expenses’ and it’s a simple savings idea,” says Tim Gorrell, executive director of the Ohio Tuition Trust Authority, which manages Ohio’s 529 Plan, CollegeAdvantage. Every budget typically has fixed expenses: rent or mortgage, car payments, student loans. Other expenses can also be reallocated if they go away—like a child no longer needing childcare or braces.
2. Don’t be afraid to ask.
The old adage, “It takes a village” is especially true when it comes to saving for college. When people ask, “What can I get for their birthday?” suggest the gift of an education.
“There are countless ways that people can do this, including online tools and automatic contributions into an account,” says Gorrell. Jarrell’s uncle set up a separate account, but anyone can also directly contribute into an account you already have. “The gift-giver can set up a one-time or recurring contribution using a unique giving code,” explains Gorrell.
3. Make it automatic.
Just like you can automatically make contributions from your paycheck into a 401(k) account, some 529 plans allow for similar direct deposit or ACH transfers. Ask your employer if your company participates. Already have a 529 plan or savings account in place? Check to see if you can set up automatic increases to coincide with your teen’s birthday or another key date.
4. It doesn’t have to be all or nothing.
Online planning tools that tell you how much college will likely cost—and how much you’ll need to save each month—can sometimes feel overwhelming. But even modest monthly amounts will add up over the years.
Joe Messinger, co-founder and director of college planning for Capstone Wealth Partners, advises that “a good target is to save for one-third, use current earnings for one-third, and take out loans for one-third.” The ultimate goal is to rely on loans for as little as possible. “Twenty-five dollars might not sound like much, but if you stairstep that every year—and every time you get a raise, increase your contribution—it builds.”
Jarrell notes, “As a single mom, I struggled with saving for so many years. But I will say every little bit adds up.”