And according to a recent survey conducted by Discover Student Loans, the vast majority of parents agree on the value of a college education. The odd thing though, is that even though more parents want their children to get an education less are planning to help pay for college.
Here were some of the results from Discover’s College Savings Survey:
- Students taking out loans for college is up. In 2013, 50% of parents said that their children would be taking out student loans to help pay for college. This year 54% parents said their child is planning to take out a student loan, according to the survey.
- Around 25% of parents can’t afford to help their children cover college costs.
- Around 46% of parents say their children should fund at least some of the cost of college.
- Almost half of parents reported that due to price they were limiting which college their child could attend.
- 44% of parents are more willing to help pay for a college degree that is in demand and has a higher chance for employment. This stat was only 33% in 2014!
- Almost half of parents believe that earning potential is more important than the major selected.
These survey results reveal that saving for college is a real struggle, which is no surprise given the ever increasing price of tuition.
If you’re a parent trying to save for your child we’ve pulled together some easy hacks for saving for college that can help.
Start Saving as Early As Possible
The earlier you start saving for your child’s college education the less you have to save thanks to compound interest.
With compound interest you earn interest on your interest. If you save $50 a month for eighteen years and earn an 8% interest rate through investments you’ll have accumulated $24,267.76, even though you only added $10,800 to the account.
If you tried to catch up and instead started saving $100 a month with 9 years left before your child entered college you’d only have $16,183.87 even though you put in that same exact $10,800.
That’s $8,083.89 worth of free money you’d be missing out on!
When it comes to investing, time is your biggest ally. The earlier you start saving, even in small amounts, the more time your money will have to compound and grow.
Take Advantage of College Savings Plans
Investing college savings over the long run is one of the best ways to save. Pair this with a tax advantaged college savings account and you’ll rack up even more savings.
The most popular college saving plan is a 529. With a 529 the money you invest grows tax free and can be used for eligible college expenses tax free. You can check with a financial advisor or online brokerage to find the 529 plan that works best for you.
Apply for Financial Aid and Scholarships
While this tip isn’t necessarily about saving for college it’s something that needs to be done so that you can lower the amount of your tuition bill.
Your child needs to fill out the FAFSA before the deadline each year to see if he qualifies for any government financial aid. In addition, there are many scholarships your child can and should apply for.
You can check out this article for the best way to find college scholarships.
Save All Birthday and Gift Money
One easy saving hack that I’ve seen many parents employ is saving birthday and gift money.
If you have young children these small amounts can add up to something big by the time your child is ready to head off to college. You can even take it a step further by asking family members to deposit into your child’s 529 plan rather than buying a gift.
Have Your Child Contribute As Well
Does your child receive an allowance? If so, have her contribute 25% to her college fund each week. If you have a teen with a part time job you can do the same.
Remember, over time these small amounts can make a huge difference. This is also a great way to teach your child the value of savings from an early age.
Make a Plan and Save What You Can
As a parent there are some things that should be a bigger priority than saving for your child’s education, like keeping the bills paid and saving for your own retirement, for instance.
Once you have those expenses knocked out of the way save what you can for your child’s college. If that means $20 a month, then save $20 a month.
The best thing you can do is make a plan and stick to it, no matter the amount. As money becomes available in the budget you can increase your contributions.
Reevaluate as Needed
Over the course of the years it’s inevitable, your life is going to change. You might get a better job, a pay raise, or the opposite could happen. Adjust your college savings plan as needed.
And remember, no amount is too small to save and the earlier you get started saving the more time your money will have to compound.
Do you have any college savings hacks?
I am a paid brand Blogger for Discover Products Inc. but my views are my own and do not necessarily reflect the views of Discover Products Inc. and its affiliates.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.