Have you ever asked yourself this question: “When should I start saving for my child’s college?” If so, then the standard advice given is to start early. And with the rising costs of college tuition and fees, the sooner you can start, the better.
However, it’s never too late to start saving for your child’s college education now.
Getting a Late Start With College Savings
According to data presented by US News and World Report , the average cost of college tuition and fees for the 2022-2023 school year for in-state, public universities was $10,423, with the cost of private universities averaging $39,723 per year.
And that doesn’t include housing expenses, transportation costs, books, supplies, or anything else needed during that time.
So, what do you do if you’re late getting started?
Use the One-Third Rule
When figuring out how to pay for college, consider the one-third rule. This strategy involves saving enough money to cover one-third of the total cost of college expenses, planning to pay another third out of your current income, and relying on student financial aid for the final third. If you can save more than one-third, go for it. But if you can’t, at least you have this one-third plan as a baseline strategy.
Explore Scholarships
Another strategy could be to get the entire family to participate in this savings quest. Your child can play a big part, in fact, by performing well academically and then exploring which schools offer scholarships. Your child could also ask family members to donate to their college fund as a birthday or holiday gift.
Save With a 529 Plan
One way to save for college expenses is with a 529 plan, which is a qualified tuition plan that is sponsored by state governments, state agencies, and educational institutions. The two types of 529 plans are prepaid tuition plans and education savings plans. At least one type of 529 plan is available in each of the 50 states, plus in the District of Columbia.
Prepaid tuition plans allow you to prepay tuition at participating colleges and universities at today’s rates. These credits can then be used for tuition payments in the future, but usually do not cover additional college expenses, such as housing.
If your child ends up attending a college or university that isn’t part of the prepaid tuition plan, the money you’ve invested will transfer over to the chosen college, but you’ll have to pay tuition at today’s rates.
Education savings plans involve opening an investment account with funds available for college expenses.
When you withdraw funds from a traditional 529 savings plan, they can be put toward college tuition, fees, room and board, textbooks, and more. You can even use the funds to pay for K-12 tuition, if needed. Investment choices can include mutual funds, exchange-traded fund portfolios (ETFs), bonds, CDs, and short-term reserves.
What if you have a financial windfall, perhaps through an inheritance or large bonus? You can actually contribute up to five years’ worth of contributions in year one of your 529 plan, which would give you the opportunity to front-load your savings and take greater advantage of tax-free growth of your account.
Finally, here’s a question that’s sometimes asked about this strategy: When is it too late to start a 529 plan? The answer: If your child hasn’t yet started college, it’s not too late to take advantage of this type of plan.
Recommended: Benefits of Using a 529 College Savings Plan
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More Tips for Parents Starting Late
If you’re getting a late start to saving for your child’s college education and want to make college more affordable, and here are four tips to consider:
• Encourage your child to take advantage of advanced placement (AP) credits during their junior and senior years of high school, as many colleges will count those as college credit hours. The more credits your child starts with in college, the fewer they may need to take and pay for during college years.
• Explore what grants are available for your child. Grants are funds that don’t need to be paid back.
• Help your child apply for scholarships. School counselors can often help with this endeavor and, by doing so, your child can go after opportunities that may be lesser known.
• Consider using digital options for expensive textbooks. If your child rented all their textbooks from a library in digital form, you could potentially save thousands over a four-year period.
And finally, if you haven’t saved enough but don’t want to burden your child with debt, you could consider a private parent student loan to help with the ever-increasing expenses of college.
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