Saving money for college can seem daunting, and it’s important to start as early as possible.
Making room in your budget now by finding the best savings strategies for higher education will go a long way.
It’s no secret that college is expensive. But don’t despair! There are ways to save for college, even on a tight budget.
The first step is to make room in your budget for savings. This means taking a close look at your income and expenses and making some choices about where to cut back.
Are there any unnecessary expenses that you can eliminate? Could you shop around and get lower rates for things like television, cell phone bills, and insurance? For example, Freeway Insurance reviews show that the people think the company is a great option for those who need affordable car insurance – even with a spotty driving record.
Once you’ve cut down the bills, consider ways to earn extra money. Sometimes a side hustle or extra job can help you get the financial cushion you need to be comfortable while saving for college expenses.
When it comes to specific college savings plans, one popular option is a 529 savings plan. These plans, usually sponsored by state governments, offer a variety of tax benefits. For example, many states let you deduct your contributions from your state income tax. And when you withdraw the money for college, it won’t be taxed.
The best part is that you can put money into any state’s 529 plan, regardless of where you live. So if you live in Pennsylvania but like South Carolina’s plan better, go for it! Also, other relatives can contribute to a 529 plan, so it’s a good way to centralize the family’s savings.
ESAs are a great way to save for college since the funds can be used for a variety of expenses, unlike 529s, which can only be used for tuition. This makes ESAs a more versatile option and allows you to save money on a wider range of costs.
Since earnings on the account grow tax-free, you can save more money over time. And as long as the funds are used for educational purposes, distributions are also free of income taxes.
However, there is one downside: all the funds in the account must be used by age 30 or there may be tax penalties. So if a student delays their education, perhaps by joining the military for a few years, it might be best to use a different savings plan.
Don’t assume you have to save for a 4-year degree. Today’s employers are more flexible, and many don’t require a bachelor’s, looking instead for specific skills, certifications, or focused training.
Whether you want to pursue a traditional education or a more focused path, you’ll need to save for your training. The best time to start is today!