If you’re not independently wealthy, chances are you’ll be relying on a variety of sources to help your child pay for college: scholarships, loans, your own savings and earnings, and your student’s savings and earnings. How can you help your student maximize savings so you don’t end up draining your retirement resources to help them out?
1. Understand how much your student will need.
Many free online calculators provide estimated college expenses for a variety of college types for the year your student will enter college. Try different scenarios to understand the range of expected college expense.
2. Foster an environment of saving.
What do you do with your paycheck? If you expect your child to save 50% of earnings in a savings account, set an example by building your own savings. The same goes for discount shopping, clipping coupons and so on.
3. Encourage your student to reduce expenses.
If your child tends to spend a large portion of earnings and gift money on clothes, for example, work with him or her to find ways to dress in the same manner for less. Think creatively—garage sales, thrift shops and discount store sales can provide a wealth of bargains.
4. Explore interest-bearing accounts with your child.
Leverage savings by depositing the money in an interest-bearing account. Spend some time researching options and discussing the risks and advantages to different account types. Make an appointment with a specialist at your own financial institution and attend with your student so you both learn your options.
5. Know the options to reduce college costs.
If you realize you and your child will not be able to save enough for college by the time he or she will be ready to enroll, consider how to reduce the overall cost of college. Will your student be able to live at home? Attend a less-expensive school, at least for part of his or her education? Work while attending college? Apply for more scholarships and grants? Graduate early?
6. Set goals and monitor progress.
Use what you’ve learned about college costs and financial products to set goals. Then, periodically check that your student is working toward those goals. You may consider a matching contribution or other reward for progress.