How are you saving for college? You could put money into your savings account at the bank. A better way to save is putting money in a money market or certificate of deposit (CD) account. However, “college savings plans are the antidote to student loan debt,” says Mark Kantrowitz.
Start today! Open an account and start with the minimum monthly contribution. I’ve seen a ton of information out there about college savings plans. Instead of only reading all this information, take action today. You can do it!
I Don’t Have Money to Save
Where are you spending your spare cash? Are you spending your spare cash on espresso drinks, alcohol, movies, dining out? Save the money for college. Make your own Caramel Macchiato or Café Mocha at home using these simple recipes. Put the money you save into your college savings plan. I was buying a Grande espresso drink 5 days per week. At $5 per drink, that’s $25 per week or $100 per month that I spent on coffee drinks. Yikes! I stopped doing that and put that money into savings.
You can stream movies online through Amazon, Hulu, Netflix, and other companies that cost a lot less than one movie ticket. Put the money you save into your college savings plan. I told myself I don’t need to see that blockbuster movie when it hits the theaters. I can wait a month for it to stream on Netflix. Plus, I save on popcorn and soda that I would normally buy at the theater. Added savings!
Have fun cooking your dinners at home. There are so many quick, simple recipes online to choose from. Eat out only on special occasions, such as a wedding anniversary or a milestone birthday. Put the money you save into your college savings plan. I love eating out. It’s easier than cooking at home. But, at $10 to $20 per meal, that’s a lot of money I’m spending on convenience and extra calories. I stopped doing that and dine out only once a month and put the rest of that money into savings.
Look at other ways to reduce spending and put the savings into your college savings plan.
Why Save in a College Savings Plan?
Here are the benefits using a college savings plan.
- Your money grows tax-free.
- Withdrawals are exempt from federal income tax when used for qualified higher education expenses.
- Many states also exempt withdrawals from state income-tax for qualified higher education expenses.
- Most plans have very low minimum monthly contribution limits making them attractive to families regardless of income level. Some states have minimum limits as low as $15.
- Money can be used at virtually any accredited college in the country. You can find qualified schools on FAFSA’s website.
- Money can be used to pay for a variety of college expenses, including tuition, fees, room, board, books, supplies and required equipment.
- Contributions can be made conveniently through payroll deduction or automatic transfers from a bank account
- Many states offer maximum contribution limits of $300,000 or more.
- Assets within 529 plans are protected from bankruptcy.
- Most states offer a low-cost option that can be opened by contacting the plan directly.
The FAFSA and College Savings Plan
When filling out the Free Application for Federal Student Aid (FAFSA) for financial aid, only about 6% of the college savings plan investment is counted as an asset if the parent or dependent student is the account holder. Watch this video, “Does a 529 Plan Affect Financial Aid?” Distributions or withdrawals from the college savings plan could count on the FAFSA as untaxed income.
Saving in a college savings plan shouldn’t be a daunting task. This is where I come in. As a college savings coach, I can help you.
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