The cost of college can be an overwhelming thought to most parents and often leads to complete denial and avoidance. However, saving is easier than it appears. Here are some tips to help you and your family avoid college debt before it starts.
Why it pays to start saving early
Here are a few quick facts about the benefits of starting early:
- If you save $5,000 for college, it can save you thousands of dollars in interest payments on student loans you might otherwise have to take out and pay back after college.
- If you save $5,000 by the time your child is five years old, it may be worth over $12,000 when they go to college.
- If you put your savings into a 529 college savings plan, your fund manager will invest it and the earnings will be tax-free when you use it for college.
What exactly is a 529 college savings plan? It's the single-biggest thing you can do today to plan for college. You can open most plans with a $0 initial deposit and low $0–$25 minimum contributions. Even if you don’t think you can contribute to your college savings plan because of your tight budget, the mere act of opening one may free up your pocketbook slightly—even if it’s only a few dollars a week! If a 529 plan isn't the right savings vehicle for you, then use whatever you are comfortable with—just make sure it's dedicated to your child’s education and not something you pull from for special occasions.
Easy ways to start saving right now
So how do you save money on an already tight budget? Here are some simple ways your family can start.
Eat at home
The biggest thing you can do to save money as a family is to stop eating out at restaurants. Even if you aren’t Betty Crocker, cooking delicious, healthy meals at home has been made easy by sites like Epicurious and chefs like Rachael Ray. If you usually eat out three times per week, you can save an average of $6,000 in one year by eating at home instead!
Be smart at the grocery store
All this takes is a little bit of planning. Here are a few things you can do to reduce your household grocery bill by 20%–30%:
- Limit your shopping trips to twice per week: The less you go, the less you impulse buy—it’s just a fact!
- Plan your meals around weekly specials: Your main course can almost always be something fresh and on sale from your grocery store.
- Use digital coupons and cash-back apps like Ibotta: These apps are free and will save or pay you money back on the things you already buy.
Make your own coffee
Even if you're a Starbucks fanatic, you can do it. Invest in a good coffee machine and buy your favorite Starbucks coffee at the grocery store (stock up when it’s on sale). By making your own coffee at home, you can save around $600 per year.
All these steps may seem little right now, but your savings will add up quickly—you'd be surprised by how much you spend on things you don't really need. Then put all the money you save into your 529 plan. Best of luck in meeting your college savings goals!