7 Common Mistakes Parents Make With a College Savings Plan & How to Fix Them
There is so much chatter these days about the true value of college. It can make college savings plans for parents a tough task to tackle when they hear very few success stories about student loans. No one wants to put their child at a disadvantage, which is why 64% of people say they're saving to pay for their child's college education. St. Mary's Credit Union wants you to avoid these mistakes when you first start saving.
Just like real estate is all about location, saving is all about timing. If you start when your children are born, you will typically pay about 6 times less every month than those who start when their kids turn 14. Compounding interest in truly a blessing if you just give it enough time. And you'll need time on your side to make it through the rough periods when the economy takes a turn for the worst.
- Choosing the Wrong Investment Strategy
A savings account will only yield a fraction of what an investment plan might offer you, and yet about 45% of families saving for college still use one. With tuition inflation seemingly being a certainty, you'll want to look into FDIC-insured college savings plan that are approved by your state.
- Paying Big Bucks for Financial Advisors
It's true that they may be able to give valuable tips, but so can the staff at St. Mary's Credit Union. Some financial decisions need more direction than others, but generally speaking, you should be able to find a high-yield plan for your child without paying the additional fees.
- Becoming Overwhelmed
A college savings plan is likely to make anyone feel as though they're climbing a very steep mountain, but this common mistake is what makes procrastination possible. Some surveys show that more than 50% of parents have absolutely nothing saved away. Saving even a third of the total cost of college will go a long way, with financial aid or scholarships being able to make up the rest.
- Keeping Money in Your Child's Name
The more money your child has to their name, the more likely it is they won't receive as much financial aid as they need. Keep all of the savings in your name for the best chance of having to pay not only the tuition, but also room, board, books and living expenses.
- Staring at the Numbers
If you automate your savings, you will eventually adjust to having less money coming from your paycheck, and this can help parents feel slightly less panicked about saving. As difficult as those first few months may be, it will get easier and easier to view that portion solely as a means to finance your child's education.
- Neglecting Yourself
As much as a college savings plan can help, it cannot come at the expense of the other major needs of the family. Retirement is right at the top of the list, so there needs to be careful consideration given to where each dollar goes. This should be done as early as possible, and then adjusted every few years as the family and economy changes.
This will most certainly not be an easy process, but knowing the tips can give you the strength to make the adjustments necessary to pay for your child's college education without compromising on your other life goals.
Download our Complete Survival Guide on How to Pay for College