Saving for college is a huge financial undertaking and must be carefully considered. Most parents would like to pay for all or part of their kid’s college expenses. However, it is important to be in a good personal financial position before saving for college. Prior to putting away money for college, consider the following:
- Decide if you will be saving for college
- View and follow the Net Worth Millionaire Plan
- Saving an Emergency Fund
- Investing into your Retirement
- Paying off all consumer Debt
- Calculate how much you will need to save per month
- Begin saving for college
Now, let’s breakdown and elaborate each bullet point.
DECIDE ABOUT INVESTING IN EDUCATION
First, let me say that you are not required to save for your child’s college expenses. You are not a good parent or bad parent based on if or how much of the cost you cover. I believe that paying for college is a parental choice. However, if you decide on saving for college, you will want to do it right. Having a plan for your own personal finances is key to long-term success both for you and for your child.
FOLLOW THE NET WORTH MILLIONAIRE PLAN
Now that you have decided to invest in your child’s education, you will need to get your personal finances in order. You will serve your child best when you are following a successful personal financial plan. View and follow my Net Worth Millionaire Plan. My plan will help you in the following ways:
- Understanding your current financial health
- Organizing and prioritizing your finances
- Getting you started on your path to financial success
- Knowing when to start saving for college (step 8)
There are seven steps before you should start investing for your kid’s college education. Why are there seven steps first? There are seven steps first so that you can secure your own financial future. Ask yourself this question…If I am broke or saddled with debt, how am I going to retire, let alone pay for college? Saving for college is Step 8 out of 10 on the Net Worth Millionaire Plan. If you are serious about providing some or all the costs associated with a college education, then take care of yourself first.
Emergency Fund
Having a proper Emergency Fund will provide you safety to cover personal financial difficulties; as well as the foundation to which you can build your wealth, including stashing money away for college. If you do not have an emergency fund and a major unexpected expense occurs, you may have to stop putting money aside for college and that will reduce the total amount saved.
Investing For Retirement
Saving for your Retirement is a critical personal financial decision. The biggest question / debate is should I “Invest in my retirement or Save for my kid’s college education.” I believe in investing into your retirement before college education. You must be financial independent when you retire. You do not want to be a financial burden to your children, rely on Social Security or a pension only, work until you pass away and etc. Your child has many options to keep his college expenses low i.e. community college, scholarships, attend a Federal Service Academy, work while at school and etc.
Paying Off Consumer Debt
Debt is a personal financial killer. You can not build wealth when you are handcuffed by debt. Before saving for college, pay off all consumer debt. Consumer debt is any debt that does not go up in value such as student loans, auto loans, credit cards and payday loans. When money is being spent to pay off debt, it can not be used to build wealth and invest in your kid’s college education. To be honest with you, I absolutely hate consumer debt. My family has no consumer debt. The only debt we have is our primary residence, which we are working to pay off (Step 9 of the Net Worth Millionaire Plan).
COLLEGE COST BREAKDOWN
You will see the average cost of a college tuition, room and board, books and supplies, transportation and other expenses at a Public Two Year/Four-Year In-State/Out-of-State and Private College/University in the chart below provided by College Board:
Vanguard’s College Savings Calculator will help you plan out the amount you will need to save for college.
SAVING FOR COLLEGE-ACTION STEPS
1-Decide if you plan on saving for college.
2-View your Net Worth Millionaire Plan
- Save your Emergency Fund
- Invest into your Retirement Account
- Payoff All Consumer Debt
3-Calculate how much you will need to
4-Begin saving for college
To summarize, saving for college is a parental choice that differs with every family. However, your should not neglect funding your emergency fund, investing into your retirement and paying off all consumer debt first. Following a personal financial plan will put you in the best position to prepare for your own future, as well as save for your child’s college expenses.
