How to Save for Your Child's College Education?

How important is it to have a college degree? It is true that college graduates fare better most of the time. They enter higher-level careers with better salaries and they are also more likely to receive promotions when they perform good in their field. People who finished college develop reasoning and communication skills that can help them secure jobs with good benefits.

These are only some of the reasons why parents give too much importance to a college education. They know that it is the best investment they could give to their kids. So while their kids are young they want to do one right thing: start looking into college savings plans.

According to data reported to U.S. News in the 2020 annual survey, the average tuition for the 2019-2020 school year ranged from $41,426 (for private colleges) to $11,260 (for state colleges). Let’s admit, college education costs go higher and higher each year and in the future, it’s going to increase more for sure.

So how do we save for our kid’s college funds?

Savings is not just about putting your money into the bank. You will not get the right amount to fund the college education of your kid with that strategy as banks give very low interest. It is also not advisable to save on coin or piggy banks, either, as the money you put into it are not protected when inflation happens. Cash depreciates its value overtime, so the best way to save is through investments.

Here are a few ways on how to save and invest for your kid’s college education, so you wouldn’t have to get a loan and be in debt just to fund their education.

Put Money Into an Eligible Savings Bonds

Savings bonds are the government’s way of raising money for debt. They promise to pay back the principal and the interest to bondholders at a later date. These bonds are guaranteed by the government and extremely low to no risk. The downside is the pretty low interest earned which is around 0.10% earning per year.

Mutual Funds Investment

A mutual fund is another good way to save since it is a professionally managed investment fund. It pools money from many investors to purchase securities and there's no limit on what you can invest.

Take Out a Home Equity Loan

The equity in a family's home is the largest asset and it is often used to cover college costs. Instead of creating a separate college savings plan, some families choose to pay down a mortgage. The goal or intention of doing so is to tap the equity if financial aid or scholarships do not materialize.

If you haven't saved enough and are looking for ways to pay for tuition and other expenses for college education, these strategies might work.

Another thing that you might consider when saving for college education, is using a tool such as an education savings calculator that comes in handy at all times, anywhere you are.

This is a calculator that will help you figure out how much is needed to set aside each month in order to fund your child's education.

How does this work? You just enter an estimated cost of college or use the default data from the site. It includes tuition and fees, room and board, transportation, books, and other expenses as projected college attendance costs and ll costs are enrollment-weighted. They are also inflated based on the selected estimated rate of inflation.

Still, the best way to save for college education is to start early so you don't have to take out as many loans. Begin putting aside money or invest as soon as you can.