Saving for your child’s education may be one of the most important investments you’ll ever make. But it’s a challenging task. Even if you have a well-paying job that provides income flexibility, it’s a steep hill to climb. But you don’t have to climb it alone.
There are many ways to supplement your college savings, whether it’s through financial aid, grants, scholarships or loans. Yet even with all the financial aid available, the more you save, the less you or your child will have to borrow. And the less you have to pay back later. That much is certain.
And remember, it’s always wise to plan for the unexpected. Whether you're saving for college through an interest-based account or by investing in a 529 plan, the unexpected may become a reality — and perhaps when you least expect it.
Protect Your Income with Disability Insurance
If you're relying on your earnings to save for college — or to pay for college while you or a loved one are attending school — what would happen if you became too ill or hurt to work? Disability insurance can provide benefits that could replace a portion of your income, so you won't have to dip into your college savings to pay for everyday living expenses.
Consider Your Investment Options
Investing in a tax-advantaged 529 plan may be a smart way to help reach your college savings goals. In addition to the tax advantages, many 529 plans offer a wide range of investment options. This will allow you to balance your tolerance for risk and investment timeline with the choices available.
Some 529 plans have "set it and forget it" options which automatically reallocate for you. These age-based tracks begin with more aggressive investments, then become progressively more conservative as the beneficiary nears college age. Like any other investment, you need to thoroughly research your options and understand that there is no guarantee investing in a 529 plan will help you reach your goals or that you won't lose the amount invested.
Keep Your College Savings Nimble
Life is unpredictable. Even if you’ve been saving money every month since your daughter was born, she may choose not to go to college or defer enrollment to join the Peace Corps. Or best of all, maybe she’ll receive a full scholarship and become a rocket scientist. With a flexible 529 plan, you have options. You can simply keep the 529 plan in place and the account could continue to grow. You can also change the plan beneficiary to another child or yourself if you decide to go back to school.
Keep in mind that you can use a 529 for any qualified expenses. So even if tuition is covered by a scholarship, your account can help take care of room and board, books and other costs.
It's also important to plan for the unexpected that might occur during college. Your son may decide he needs a car or wants to travel abroad, or he may suddenly fall ill. Make sure you have savings outside a 529 plan for those extra expenses not considered qualified expenses, that may pop up.
It’s Never Too Late to Start Saving for College
Sure, it’s better to save for college as soon as possible. But whether you have a newborn or a late teen, it’s never too late to create a strategy to save for college. Even if you don’t use the funds until senior year, every little bit helps.