When you have a child, all you want to do is make sure that you’re providing for them. That doesn’t just mean ensuring that you’re bringing in enough money to pay for their food and other expenses. It also means considering what you can do to contribute to their future. A college savings account is a great way to set your child up for success when they’re older. However, when you’re struggling to manage your budget, it can be difficult to find enough cash for both college savings and your own future.
After all, while it’s important to give your children the best possible head-start in life, you don’t want to leave yourself without any money to fall back on when your retirement years roll around. So, how can you improve your chances of saving for both things successfully?
1. Examine your Current Spending Habits
The less money you’re spending each month, the more you’ll have to put away towards things like college funds and retirement accounts. Before you start distributing your money to various different areas, figure out where you’re currently spending the most money.
Taking an active approach to understanding your spending habits could help you to make better financial decisions in the long-term. For instance, if you know that you have a lot to save for, when you take out a loan, you’ll be more likely to spend extra time looking for the solution that give you the best service, for the lowest interest rate and smallest fees.
You can also look for ways to regularly reduce your spending, by switching to different utility providers when prices grow too high or checking out other areas where you can cut costs.
2. Put your Retirement Savings First
As a parent, you’d likely to anything for your child. That makes it very difficult to put your own financial needs before theirs. However, most financial experts recommend prioritizing retirement savings over college funds. Ultimately, your kids will have a lot of other options available to them to help them get through school, including grants and scholarships. However, you only have a handful of options available as a retired individual.
Make sure that you’re funding your retirement plan enough that you’re getting the most value out of any employer match programs. Once you’ve done that, you can put leftover cash towards your college savings. Remember, when you get raises at work and other extra money, make sure that you use those to increase your retirement savings too.
3. Use a 529 College Savings Account
A separate savings account is always a good idea when you’re dedicating cash to something specific. However, the best option for college savings is a 529 savings account. These are investment accounts that allow you to build some money without any tax penalties. Money invested in a 529 plan will be able to grow with the market, and you’ll be able to achieve various tax breaks.
As your child grows up, consider asking friends and family to contribute to their 529 savings account instead of buying them gifts they don’t want or need for their birthday. You can also dedicate any other spare cash you find along the road to this account. Consider selling old baby products and clothes that your child never used to make some extra cash back for their future. You could even put a portion of the money you would give your child as an allowance towards their college fund.
4. Plan for the Future with your Kids
Finally, as your children start to get a little older, don’t be afraid to include them in your savings plans. For instance, you can ask them how they’re planning on applying for financial aid. There are a lot of grants and other available sources of help out there that you can access if you’re willing to do the research. You could even ask your kids to get a job after school so that they can contribute to their own education.
Remember, it’s a good idea to start targeting academic and athletic scholarships as early as possible – even from the moment your child starts high school. This will give you more time to track down the right source of support for your child. You’ll also need to figure out where your child wants to go to college, so you can get an idea for how much money you’re going to need to save. Some schools are a lot more expensive than others.