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Tips to Save for College
(StatePoint) As thousands
of high school graduates prepare for college, more than a
few households are coping with “sticker shock” when it comes
to higher education costs. And many students are leaving
universities not only with a degree, but a mountain of debt.
However, decades of
student loan payments don’t have to be in store for you or
your child. With smart, long-term planning, this financial
fate can be avoided.
“Anyone who anticipates
paying for a college education at some point down the road
should have a budget plan that includes a college savings
fund,” says Diane Morais, the deposits executive at Ally
Bank.
Regardless how far in the
future your first tuition payment lies, consider these steps
toward establishing a financial cushion:
• Do your homework on
college costs: While it’s hard to predict future college
costs, choose a school that might be an option and plan on
an annual tuition increase of about five percent to get a
ballpark idea. Don't be dissuaded by the amount you may have
to save – with time on your side, much is possible.
• Budget for savings
goals: Prioritize future college expenses as a monthly
budget line item. The sooner you start saving the better,
because even small amounts of money invested early can grow
quickly through the power of compound interest.
• Consider safe, secure
growth: Investigate options where your money can grow safely
and securely, such as CDs. Also look for a bank with
competitive interest rates and no maintenance fees, such as
Ally Bank, which compounds interest daily and allows
consumers to open an account with no minimum deposit.
• Set up a dedicated
account: Create a college savings fund and pass the word to
family members and others who may be interested in pitching
in over time. Many banks allow customers to nickname
accounts, such as “Billy’s college fund” and offer the
ability to "link" individuals to make deposits into such
accounts for those who prefer to give a gift with lasting
value.
• Automate your savings:
Use direct deposit or recurring fund transfers to put a
portion of your income into college savings automatically.
With every raise or bonus, increase this amount.
• Divert unnecessary
expenses: Premium cable channels, magazine subscriptions and
fast food costs can be considered extra and might be better
spent when put toward a college fund. For more budgeting
tips, visit www.AllyWalletWise.com.
• Investigate all your
options: See if your employer or state offers tax-deferred
savings plans for college. Take advantage of opportunities
that are right for you and your family.
• Preserve other savings:
College is expensive, but students have more sources of
money for college than you will for retirement, so don’t dip
into your 401(k) or other retirement savings. Many accounts
charge a penalty for access and you’ll be harming your own
possibility of a comfortable retirement.
Don’t wait until your
child is graduating high school to worry about college
expenses. The sooner you start planning, the better position
you’ll be in when this critical time arrives.
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