Getting an education is a core value and an essential for every student to sustain a productive and independent life.
As parents build a strong foundation by supporting their children to follow their goals, students start dreaming about their future career paths.
After completing high school, it’s time for students to advance their career in professional degrees.
The degree programs may cost higher and hence it is best to plan ways to cover tuition fees in advance. Saving is one of the self-initiative methods that gives relief while paying for tuition which reduces your burden of needing other financial aids.
Here is a guide on how you can save enough money and how to avoid some common mistakes while saving.
Common Mistakes to Avoid while Saving for College
Getting into a college may impact negatively on your finance but you could enter into a world of opportunities after earning a degree. Saving for college in the right way can help you manage finances.
There are various mistakes that can be easily avoided while saving which are,
Mistake 1- Don’t assume that money will grow in 529 plan
The 529 college saving plan is an option to invest for the future educational expenses with tax-deferred growth and potential for tax-free qualified distributions. But don’t expect that your money will increase as it depends on the fluctuating market conditions.
There are also risks of losing money. The savings you made can also decrease due to inflation. Meaning it may not be sufficient to pay for your college.
To avoid these you can start investing on the 529 plan early as the long duration can help you recover any market losses with time.
Also, you could take advantage by implementing these:
- Potential compounding growth over time
- Avoid borrowing money when not necessary
- Getting the right timing for the withdrawal of money
- Adjust your asset allocation and savings rate
You could also go through the https://my529.org/ to make education savings for the future.
Mistake 2- Stop Depending on Scholarships or Grants
As a high school student, your choice of college may seem unaffordable due to low savings or poor financial situations. In such situations, you can look at other ways to cover for your tuition such as winning a scholarship or grant.
The scholarships are given based on your performance in various fields such as academics, athletics, art or other special interests. If the savings aren’t sufficient to pay for college, the next goal is to aim at a scholarship.
But joining a scholarship takes a lot of effort and is time-consuming. We advise saving rather than overly depend on these awards.
You may look for various Scholarships for High School Juniors while still at school to find the right fit according to your requirements and begin preparing early to win one easily.
Mistake 3- Avoid Waiting for Too Long
Saving early for the future is always better and cheaper than borrowing a loan later. Hence, don’t delay your decisions and begin on an accumulation plan.
The sooner you start, the more time is available for the money to increase. As a parent, stop waiting for the right time and when your child is still young, you could open an account by completing the application process, paperwork, exception of the name, social security number etc. Also, enrolling to an automatic monthly investment can be advantageous.
Mistake 4- Guided by Guilt
Don’t be guilty if you can’t afford to handle the yearly expenses for a degree program. It is best to choose an affordable college instead of joining your dream college where you cannot manage the cost.
Sometimes students are supported by their families by investing their retirement funds or taking a parent loan. This becomes a financial as well as an emotional burden.
So you must choose the right future you want by not jumping into an expensive college and work on your abilities to make it affordable. Students should also be taught of saving where they can work towards affording their dream college.
Other methods can be by taking a Student Loan for College where you may get lower interest rates as well as attractive repayment options which can be paid while working.
Mistake 5- Avoid Loading Up on UGMA/UTMA Accounts
The UGMA/UTMA are custodial accounts opened by parents for their children. In this tax savings are accumulated under the children’s social security number.
However, the relaxed are lower depending on the amount in the account. Parents should know that these accounts are not completely risk-free and loading up these accounts will not fetch them money. It is technically their children’s.
So, when the child turns to be a major, parents might end up paying the tax brackets and give up control over the savings. Hence the primary purpose of these accounts is taking responsibility for the assets till the child turns to be a major. Hence stop losing them up with your savings.
Mistake 6- Posing Parental Responsibility for College Choice
As the child grows, there might be differences between parents and children regarding the choice of schools. Parents may not be able to afford the choice of the child.
Hence, saving plays an important role where parents can make financial decisions early and communicate about the financial responsibilities to their children.
This helps students understand that the opportunities and financial goals can be set without boundaries in the future by making joint decisions on choosing the college and communicating honestly with an open spirit.
Parents and Students must avoid making these mistakes and follow the right methods to save for the future such as starting with a plan, investing in the right account, learning about one’s financial ability, communicating effectively about the goals, choosing the right career path and with consistent effort.
You could also take responsibilities and discover your own way to continue education. Savings can be started with small amounts which can be fruitful later to avoid overall education expenses. It is never late to start saving money!