With 70% of Americans graduating college with an average of $30,000 in debt, it can be really difficult to imagine saving for our children’s education when we’re still paying off our own student loans!
At the same time, that’s exactly what makes it hit home for me. I don’t want my kids stepping out into adulthood chained to tens of thousands in debt like I did. Wouldn’t it be amazing if somehow, they could get the same awesome educational experience and graduate debt free?
That’s why, even in the midst of our own journey to debt free, my husband and I found ourselves opening college savings accounts for each of our children.
If you know our debt free story, then you know we were doing everything possible to save money, so we didn’t have even a penny to spare to save for college. Even now that we’re debt free, it will be many years before we’ve saved enough to buy a house or put away for our own retirement, let alone save for our kids’ college funds!
However, I’ve found, as with getting out of debt, things may appear hopeless at first, but just getting a clear picture of the situation is the most important step to reaching our goals.
How to Save for College on a Tight Budget
Creating a college savings plan is a great opportunity to instill some important financial lessons in our kids, including the importance of living debt free.
Kids should be an active part of their college savings plan, including contributing a portion of the money they earn throughout their childhoods including money from gifts, allowance, babysitting, lawn mowing, summer and after school jobs.
Our current college savings plan for our 1 and 3 year old children includes simply contributing all of their birthday and Christmas money to their college fund. Yes, they’ll probably think we’re mean, but believe me, they still get plenty of gifts.
I do hope that we’ll be able to help our kids save more in the future, but even the small amounts listed above really add up!
Does $30 a Month Really Add Up?
Let’s say my one year old daughter saves an average of $30 a month for the next 17 years. Even if we left this in a regular savings account, she’d end up with around $6,775. That really adds up!
Since we’ve invested in an Education Savings Account (ESA), her college savings can grow at a much higher rate. By the time she graduates from high school, she could have around $13,073 to put towards college.
With each passing year, the potential to grow their investment shrinks. For my son, just two years older, our $30 a month may only grow to $11,832, even though he is starting out with twice as much in his account!
Get Your Free College Savings Plan
Try out this free tool for yourself right now to figure out how much you need to save for each of your children to send them to college and to help them minimize those student loans.
Go to FutureAdvisor to Get Your Free College Savings Plan for your kids.