Wednesday, April 29, 2009

Save For Your Child's College Education

Saving Money Tip #128 - Save For Your Child’s College Education – Part 1. We all know that college is very expensive these days. In fact it seems that the costs are out of control and only getting worse. Knowing how hard it is for us to save for our children’s college over a period of 18 years, think how much harder it would be for a child to pay his own way. Yes, he can work summer jobs or work during school or apply for scholarships or go to community college. I wrote about some ideas to keep college costs lower here. However, I think the prudent thing for a parent to do is help his child with college costs.

I know that it is not possible for everyone to do this. However, I think more people have the ability to help out than they realize or admit to. I’ve heard nearly every reason that people feel they should not pay for their child’s education – they cannot afford to do so, the child will appreciate it more if he pays for it himself, no one did it for them, the child might not go to college, among others. However, I feel it is important to help out your child, if at all possible. Let’s challenge some of the excuses people make for not saving towards their child’s education.

“I can’t afford to save for college.” Just putting away $50 each month – the cost of a monthly cable bill - from the time the child is born until he attends college 18 years later would yield over $10,000 even if the money did not earn any interest! With a conservative interest rate of 5%, the money would be worth over $17,000! Even that small amount of $50 per month would put a nice dent into college costs.

“No one helped me pay for college.” If no one helped you, think how hard it was for you to either earn the money or for you to pay back the debts once you finished school. Also, starting out in the “real world” with debt just sets up a person for getting behind on his own savings plans.

“He’ll work harder at school if he pays for it himself.” I don’t believe that people who pay for their own education work harder in school than those who don’t. Raising a child to be grateful for what he has goes a long way to having a child who appreciates education, whether his parents paid for it or not. Furthermore, many people work hard to earn money and then turn around and waste it frivolously. Making money on your own doesn’t seem to guarantee that a person will use it wisely.

“He may not be college material.” Yes, it is true that not everyone will go to college, nor is college right for everyone. However, regardless of what your child does after high school – goes to college, learns a trade, starts a business, a solid financial backing from mom and dad would be helpful.

I realize that many people cannot fully cover the total cost of their child’s education. But contributing at least partially to their child’s college costs sets up a good cycle of saving habits that your child will learn from, not to mention the emotional reward he gets that mom and dad are behind him in his college endeavors. In the next part of this series, we’ll discuss various ways to save for college.

In Real Life (IRL) – My parents paid fully for my college education as well as that of my brother and sister. Neither of my parents attended college so they started a trend in our family that will hopefully continue into the next generation. I am saving for my children’s education, as is my brother. And I know that my sister is already paying for her kids’ college education – although they may be contributing some themselves, as well. Watching my parents scrimp and save to put us through college left an important mark on me. I knew they had sacrificed a lot so that we could get an education. And I did not squander it. Neither did either of my siblings. I think we all worked hard at school. Of course we weren’t handed money on a silver platter. We all had jobs in the summer. I worked through a bit of college, as did my sister.

And frankly because I had no debt coming out of college, I was in a better position than most people to get started on my own savings plan. I immediately started putting money away the first year I started working. And by the second year, I was already saving for retirement. Many of my friends, on the other hand, were busy paying off college loans, setting them back a few years until they could even consider starting a savings plan.

All this to say, if you can put money away for your kids’ future –whether it be college or a trade school or some other legitimate cause, I think it is worth it to do so. Of course, your life takes precedence, and most experts will suggest you save for retirement before saving for your child’s education. And I agree. But if you can do both, that is really the best. In the next post, we’ll discuss ways to save for college.

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