Oh, the college days. Even while studying finance, I made a few big money mistakes. The biggest mistake was made before college . . . .
Had I saved for college? Nope. I didn't even know how to save money!
Did I go into student loan debt? Yep.
Was there enough money in my bank account to fill a kiddie pool while in college? Hardly a drop.
Unfortunately, it took some time for me to learn sound financial principles . . . you know, like the ones mentioned in this article.
But the important thing is that I eventually woke up and realized there was a better way to handle money.
And listen, when it comes to college, the sooner you start saving, the better. Tuition inflation rates have been ridiculously high, and while nobody knows what the future holds, it seems that the trend is going to continue.
Ladies and gentlemen, you need to save for college – whether you're already in college or you're planning on attending at some point in the future. Let me show you a few methods you can use simultaneously – if you're daring.
1. Stop buying stuff you don't really need and put the money toward college.
Chances are, if you live in America, you're financially rich. If you don't believe me, head on over to GlobalRichList.com and take a minute to find out just how wealthy you are in comparison to the rest of the world. Don't worry. I'll wait while you crunch a few numbers.
[Intermission music. Bach, or something.]
Alright, what did you find out? That you're in the top 25% of the richest people in the world by income? That you're in the top 10%? 5%? 2%?
You see, you're rich. If you're rich with what you already have (your awesome income), and you know education is important, why would you buy stuff that you don't really need and sacrifice the opportunity to fund your college education (or your children's college education)?
Don't get me wrong. It's okay to have a little fun every now and then. But instead of financing a Tesla Model S and cruising down the road with gold chains around your neck, don't you think it would be prudent to invest money in education?
Remember, just because you're rich doesn't mean you can afford luxury.
Unfortunately, college is expensive, and my suspicion is that tuition inflation is going to outpace overall inflation for quite a while. Save your dollars for what matters. The fun stuff can come later. Besides, having contentment is a virtue.
2. When you do buy stuff, earn some cash-back rewards and put them toward college.
Every once in a while, I'll discover a new way to save some money on goods that I was already intending on purchasing. Every dollar counts, especially when you consider how compound interest can benefit investment accounts such as the 529 college savings plan.
Upromise by Sallie Mae can help you save for college. In fact, it can even help you pay off those pesky student loans. Plus, it's pretty easy to use. #Upromiseit #UpromiseFinFit
Here's how it works. Simply join for free at Upromise.com. There, you can start your online shopping and earn a percentage in cash back on the purchases you make.
More from GFC, Below
Best yet, with Upromise you can shop at more than 850 online partners' websites and save for college by making your everyday purchases.
Why wouldn't you take advantage of something like this? Beats me.
Another great feature of this program is the ability to invest any cash you earn into an eligible 529 college savings plan. These plans provide a tax-advantaged way to save for qualified higher education expenses.
In student loan debt? You can opt to throw your cash-back rewards toward an eligible student loan. What a fantastic way to chip away at your debt!
Alternatively, you can transfer the money into an FDIC-insured Upromise GoalSaver account or withdraw the money by check (if you withdraw by check, avoid the temptation to use the money for non-college expenses).
Click here to join Upromise free of charge. I think you'll be glad you did.
3. Systematically save for college (create a plan).
While it's a good idea to use cash-back rewards and monetary gifts from family members to save for college, they may not be enough to fund a college education. Instead of leaving your education funding up to chance, I encourage you to systematically save for college.
In order to do so, you're going to need to calculate the cost of college. By taking into consideration factors such as annual college costs in today's dollars, the college cost inflation rate, the expected years of attendance, the percent of costs you plan to cover from savings, and the number of years until college, you can get an idea of how much college will cost by the time you enroll.
Once you input these factors, take a look at your savings goal. That's how much money you'll need to save in total to pay for college.
There are many other factors that go into figuring out, for example, how much you'll need to save every month until you start college in order to have enough money for school. Some of these factors include:
- Whether or not you use tax-advantaged college savings plans
- How well investments are anticipated to perform over the course of the time you're saving for college
- How much money you expect from other sources such as cash-back rewards, monetary gifts from friends and family, and inheritances
My recommendation is that you sit down with a financial advisor to determine how much money you should be saving toward education.
Final – Yet Vital – Bonus Tips
Saving for college, in my experience, is pretty low on most people's to-do list. Why? Because they're thinking about their bills that need to be paid, the research that needs to be completed before implementing a plan (which may feel overwhelming), and the possibility that college funds might not be utilized anyway.
While these concerns represent real challenges, there are real solutions to each of them.
Get on a budget.
Start a budget to save money on your recurring and one-time expenses. Reduce the cost of your recurring bills for major savings that you can use to help fund your college savings plan.
Even though it might seem like a chore to figure out how much you need to save every month or to figure out which kind of college savings account you'd need to start, begin today. When you simply start on a task, you'll be motivated to continue and complete it.
Prepare for the possibility.
Even though your child may not choose to utilize the college funds, some accounts have the ability to be transferred to other beneficiaries or the funds may be utilized for non-qualified expenses (although there are catches).
Simply put, it's better to have the funds available and not need them than to need them and not have them.
Take the first step today to save for college. It's easier than you might think.