Every year, hundreds of thousands of young adults head off to college, seeking an experience that will enrich them both academically and socially. But increasingly, that college experience is being seen less as a chance to explore and make mistakes and more as a critical stepping stone to securing one’s place in society. Because of this, it’s no wonder that college is getting more popular, more competitive, and more expensive.
If your kids are thinking of going to college, it’s helpful to think about saving for it as early as you can. That gives you and your family the best chance of being able to make it work. But even if you can’t or don’t start saving “early,” it’s definitely still possible to make headway on your college savings goal.
Here are some practical how-tos of saving for college to help kickstart your plan.
Step 1: Figure out how much you want to save
This is easier said than done, because the reality is that you can’t know exactly how much college is going to cost until you fill out your FAFSA and pick a school. But for now, you can at least get a ballpark figure to start working towards.
Start by using an online college savings calculator to get an estimate on how much college might cost on average (i.e. the sticker price) and how that stacks up to the amount you might be able to save each month. If you’re not sure how much you can actually save per month, just start by estimating and then go from there.
Once you plug in the numbers, these calculators will then take the average cost of college, subtract the average amount folks receive in aid for your income bracket, and then tell you if your savings will help you get there by the time your child is 18.
Based on those numbers, you’ll be able to get a sense of what’s actually possible based on your kid’s age, and how much you expect you can set aside.
If this all still seems way out of range, that’s okay! Even if your monthly contribution estimation doesn’t completely fill the gap, having even just a little bit saved up is helpful in the long run.
Remember, if you’re budgeting with a partner, be sure to include them in this conversation. And, be sure to also include your kids so they can know what’s expected of them. If you need resources to help you include them in an age-appropriate way, we really like the Consumer Financial Protection Bureau’s resource on kids and money.
Step 2: Create or update your budget
Don’t have a budget yet?
We always recommend creating a budget to help you accomplish your financial goals. If you’re not budgeting with Goodbudget, now’s a great time to get started.
Once you’ve signed up, you’re ready to make your budget, head over to our How to Make a Budget guide and follow along with the steps in Option A where you’ll learn how to make a budget based on your past spending.
As you make your budget, make sure you’re allowing space for your college savings, which you can track with a Goal Envelope. Set the budget to what you plan to save in total, along with a due date that matches when you’ll need to have the goal completed. This way the Envelope will help you save by telling you how much you’ll need to set aside each month to reach your goal.
After you’ve done that, you’re ready to fill your Envelopes and add your transactions. If you’re using Goodbudget Premium to sync with your banks, you’ll confirm and categorize your transactions rather than add them manually.
Already budgeting with Goodbudget?
If you’re already budgeting with Goodbudget, your task is more straightforward. Head to your budget and create a College Goal Envelope with a budget set to what you plan to save for yourself. You may need to adjust some other Envelopes so that there’s space in your budget for your new Envelope. As you tweak, make sure to keep an eye on your overall budgeted amount so that your new budget doesn’t equal more than your income.
Step 3: Start saving!
From here on out, you’ll just be watching your College Goal Envelope’s balance grow as you add money to it. In real life, you might consider tracking those savings dollars with a 529 Plan, which is a type of savings account specifically designed for education savings that has some tax benefits and works much like a Roth 401(k) or Roth IRA.
And lastly, as you live with your new budget for a while, you’ll get a better feel for whether or not it’s working for you. Remember that you can always make adjustments as needed to reduce or increase your savings amount so that they match your values, you and your families expectations around who’s paying for college, your savings target, and your income.
