Creating a Budget to Make College More Affordable




Are you saving for the future?

College might seem light years away when kids are small, but time flies faster than you'll expect. From pigtails to lipstick and action figures to car keys, they'll be grown and ready for college before you know it.

Saving for college can negate the mountains of debt that some parents and students manage after graduation. In the simplest of terms, saving $100 a month for 18 years results in $21,600. That doesn't include any interest that would make the balance grow.

With a college savings plan, your money can grow a bit faster. The sooner you fit it into your budget, less monthly burden college savings will be.

Stocks are Sometimes Risky, but Might Be a Good Investment for College

If you're not familiar with the stock market, college savings might be a good time to take the plunge, according to CNN Money. Long-term investing can yield impressive results, but of course the standard disclaimers apply. There's no guarantee from one day to the next how stocks will perform. But over the long haul, it's less risky.

Mutual funds make saving even easier. If you don't want the responsibility of watching the stock market every day, let a professional investor take charge to produce and manage a mutual fund portfolio for you.

529 Savings Plans Offer Two Distinct Choices

State-sponsored 529 savings plans, or "Qualified Tuition Plans," are available at the state level. Two types of plans exist, and every state has at least one of them.

The U.S. Securities and Exchange Commission explains that a College Savings 529 lets you, the account holder, create an account for your child, the beneficiary, to pay for college expenses later. This is not a savings account, but more of an investment portfolio.

Your funds may be invested in stock or bond mutual funds, money market funds, or other investments, and investments gradually become more and more conservative the closer your child is to college age. In most cases, there is no residency requirement.

Prepaid Tuition is the other type of 529. It's a bit more conservative and flexible at the same time. With this type of plan, the S.E.C. says you can purchase education units at a locked-in rate, which means the units are paid for whether or not tuition is higher when your child enters college.

Unlike a College Savings 529, Prepaid Tuition money is backed by the state. It's basically purchasing college in advance for a presumably lower cost than you'd have years from now. There is a residency requirement, so you or your child will need residency in the state where you purchase units prior to college.


Growth is in your hands.

Every Little Bit Helps

Not every parent has the means or desire to invest or buy units toward education, but many still want to save. Every dollar you put aside is a dollar you or your child won't have to finance later. Consider this: You can wiggle your budget, put a dollar aside now and earn a little interest, or you can finance that dollar later and pay interest. Saving makes your money work for you, not the other way around.

Whatever you can save, try to make it a habit. But CNN Money warns that college savings shouldn't come before retirement savings. Your children will have more resources when they enter college, whether from low-interest student loans, grants, scholarships or other means, than you will have at your disposal when you retire. So save sensibly.

Mint.com can help you save and manage your budget in more ways than one. Keep an eye on accounts at the touch of a button, get alerts when interest rates change, and see your overall budget at a glance.

Sign up for your free Mint.com account today and start saving for tomorrow.


Carole Oldroyd is a freelance writer who helps families develop and stick to a budget.