If you have kids, one of the main worries you have is how you’re going to be paying for college for them. College costs have been increasing wildly. So many kids are starting out their lives with huge student loans dragging them down. Or worse, many parents are putting their home or retirement savings at risk for paying for college.
I really worry about that. So when our kids were young, we determined that we were not going in that boat. We have 3 sons, so that could have a crash and burn, it worked out pretty well for us. We aren’t quite done, but so far, we’ve been able to pay all cash for school. Although our that our boys are unusually far apart in age – almost a decade each. So we had time on our side and that’s important.Many parents are putting their home or retirement savings at risk paying for college Click To Tweet
Start Saving Early and Remain Steady
One thing we did was to start fairly early. Even though we had very small amounts to work with, we were very regular about our college savings plan. I don’t think we ever set aside more than $25 a week for paying for college. It’s only $1,300/year in actual dollars. But when you add the power of compound interest to it, over an 18-year time span, it can grow remarkably quickly.
When our oldest was just a baby, they had a savings bond program at work. Back then, we got paid weekly and they would take $25/week to buy a $50 savings bond. I thought that was brilliant, so I signed up for it right away. Then I eagerly tracked my growing stash of savings bonds every week.
Keep in mind that 30 years ago, savings bond rates were a lot higher. You’d probably need to find something better now, like a T-bill or an educational Roth account. By the time that job ended two years later, I had over $2,000 in savings bonds. Fortunately, I shoved them in a drawer and mostly forgot about them for a decade. By the time our son was ready for college, they were valued at over $10,000. Sweet!
He ended up choosing to go to a trade school rather than traditional college. He was also able to get some grants and scholarships. So we only ended up out of pocket by about $4,000 for his education, and we were able to easily cover that. #1 was through his schooling debt-free and off to his career.
We also were saving up another $25/week in a more traditional savings program for our second son who was about 10 at the time. That’s the key:
- Start thinking about paying for college as early as you can. Resolve to avoid the student loan trap if at all possible.
- Save what you can – even if it’s only $25 a week. Even on a tight budget, that is do-able.
- Set up an automated savings program that you don’t have to think about. Remember those savings bonds in the drawer. If they hadn’t been such a hassle to cash, we might have been tempted to use them when things got hard. But we never touched them.
- Find a good investment plan that will pay decent interest in the long term with minimal risk.
On the next page, we are going to talk about making great choices for college programs and getting scholarships.
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