5 Ways To Save Money For Your Childrens College and Education
Here's the fact: the US Census Bureau says that college education has the most significant impact on how much a person earns in a 40-year working period compared to other factors. By that alone, you can conclude that it's practical to save money for children's education. But is it enough?
Your ability to send your son or daughter to college in the future depends highly on your ability to earn today as well as your overall financial status. You can actually start a savings plan as early as today, but you also have to put your house in order to make sure that you achieve your goal.
1. Clear off your existing debts
Pay off your loans as early as you can. If you have a loan that has a payment term of four years, finish it off under three years, if not sooner. This may include deciding on what assets you will want to sell off, or letting go of any investments you have in order to pay back what you owe before they depreciate. For example, if you have any leisure vehicles like motorbikes and speed boats that you no longer operate, you may want to convert them back into money instead of just letting them sit there.
Once you are free from debt, use the same amount of payment as savings for the college fund on the fourth year. This way you won't have to make any dramatic switches in lifestyle and still continue living the way you have for the past few years.
2. Create an emergency fund
How much will it cost you monthly to live a decent life; meaning, the cost of eating three meals a day, paying the utility bills, rent, and other basic stuff? Save an amount equivalent to six months. This will be your emergency fund in case you lose your job and six months is enough for you to look for another decent paying job without ending in the streets.
If this is not something you can do, you may perhaps want to purchase income protection insurance. For just a few dollars a week you will get the protection if you ever lose your job. The insurance company will pay you the salary you were earning for a period of time until you are able to find another mean of income. Decide which option is more beneficial to you.
3. Prepare for retirement
This might seem a bit odd, but it's practical as well to make sure that you live comfortably in the future. You don't want your children to feel guilty about going to college and spending the savings. Start by making a list of everything that you will need in order to live in your old age, and then find ways to invest towards them. If you are still in the work force, ask your employer about the retirement saving plan, such as a 401(k) plan and contribute to it the best of your ability.
Another important thing is to review your will and powers of attorney. You should always have a valid legal document stating who your finances you go to when you die. Though it may sound a bit too soon to do so, but it is good to be sure who you want your estate to be distributed to.
4. Look for means to save money that earns interest
Opening a savings account is one way to do it, but make sure that the interest is high enough to mean something. This may mean to have a term deposit instead. You can also explore other means to save that are tax-exempt. Some people might decide to invest in shares however this can go a wrong turn considering how volatile the economy is right now. Other options include investing in gold, silver, and even antique art. If you consider yourself tech-savvy you may even want to try investing in online currency such as Bitcoins.
5. Guide your children to value education
Your effort to save will have no value if your children do not see the importance of going to college and getting a diploma. Early on, teach and guide them to prioritize education more than anything else. Encourage them to look for a job early on and explain to them that without education the pay can be unsolid. Through this you can also ask your children to pitch into the saving so that they won't take the money you are saving for them for granted.
Of course everything mentioned above is easier said than done, and may require several years for it to take effect. The most important step is to know yourself.