Deciding on how to pay for your child's higher education is a huge financial commitment that requires careful planning and budgeting. When my children were born, deciding on how to pay for their higher education seemed like a huge and overwhelming task.

 

 

The costs of college have risen exponentially over the years. According to research from the College Board, published tuition and fees at public 4-year colleges have increased a whopping 37% beyond inflation over the past decade alone! This rate of increase is simply unsustainable for most families like mine. Back when my kids were born in 1999 and 2013, we felt lost on how to even begin saving for their future college expenses. Quality online resources were sparse at the time, and I didn't have many family or friends who could provide advice from experience.

 

After asking around, I realized first that I needed to estimate the total costs involved. This included tuition, room and board, books, fees, travel, and other expenses. According to the College Board's figures, the national average published total for one year at an in-state public college was around $25,290 for the 2021-22 school year. A moderate estimate for a full four years at a public university could total between $100,000 and $120,000. While private colleges averaged higher at $54,880 per year, even public schools represented a huge financial commitment for my family.

 

 

Next, I discussed potential college funding options with my husband to determine how much we could contribute from his salary and savings versus how much kids might cover through financial aid, scholarships, jobs, and loans during school. After subtracting the estimated contribution, we determined a reasonable savings goal for our share of their anticipated costs.

 

From there, I developed a tailored college savings plan with the help of a financial advisor,  and a timeline aimed at meeting that funding target. I used free online calculators to estimate how much we would need to save periodically, adjusting the figures for projected inflation and investment growth. For example, the calculator showed that putting away around $400 per month in their college fund from birth through age 18 could grow to almost $100,000, assuming a reasonable 6% average annual return over 18 years.

 

As they grew up, we continually fine-tuned our plan based on actual college cost of inflation, changes in their college ambitions, and fluctuations in the investment returns we were seeking. I tracked our progress rigorously in a spreadsheet to ensure we stayed on track. With focus and effort, I found college savings quite manageable through the years despite volatile markets and ever-rising tuition expenses. Here are some key strategies that worked well for our family:

 

Choose the Right College Savings Accounts

When first building my college savings plan for the kids, selecting the right accounts to maximize tax advantages and investment returns proved crucial. Here were some of my top options at the time:

 

529 College Savings Plans:

These state-sponsored plans offer unique tax perks ideal for that are for college savings. Our contributions grew tax-deferred over the years. Later, withdrawals for their college expenses came out tax-free.

 

 

While investment options were somewhat limited, target-date funds provided a hands-off approach to get more aggressive stock exposure when they were young, then automatically shifted to more conservative bonds as college approached.

 

Coverdell Education Savings Accounts:

While contribution limits were lower at just $2,000 annually, Coverdell ESAs (Education Saving Accounts) offered more flexibility to fund K-12 expenses. They worked well combined with the 529 Plan. The downside was income limits for making full contributions kicked in at around $95,000 for single filers and $190,000 for joint filers.

Custodial Accounts:

I also put some college money in UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) custodial accounts that offered more investment choices and flexibility on withdrawals. However, I knew any gains would be taxed at the kids' rate rather than my lower rate as with 529 plans. Also, the money was transferred irrevocably to their control at age 18 or 21.

 

Roth IRAs:

Though designed for retirement, Roth IRAs (Individual Retirement Accounts) allowed tax-free growth potential coupled with the ability to withdraw contributions tax-free for college if needed. I could also tap $10,000 in earnings tax-free for their qualified education expenses once my account was open for at least five years.

Savings Bonds, CDs, and Taxable Accounts:

I supplemented my 529, Coverdell, UGMA, and Roth accounts with Series I and EE savings bonds, certificates of deposit, and a regular taxable investment account. This diversification provided more options and flexibility.I worked with a financial advisor to incorporate a tailored mix of accounts into my family's overall financial plan. Spreading college contributions across different vehicles helped reduce risks and maximize returns.

 

Automate Regular Contributions

Once I developed a reasonable college savings budget and timeline, I automated recurring monthly transfers from my bank account into the kids' 529 plan. Online bill pay made this easy to set up. I also had 529 contributions automatically invested through the plan's recurring purchase option.

 

Any time my husband received a bonus or raise at work, he immediately directed a portion of it to the kids' accounts. Birthday gifts went straight to their college fund, too.

 

Automating my savings habits took the manual work and decision-making out of the process. I could put college investments on autopilot and let the compound growth work its magic over 18 years.

Invest Aggressively With Stocks When Your Child Is Young

To generate high returns in the kids’ college accounts during the early years, I invested heavily in stock index funds with broad exposure across the entire market. An index fund is a type of mutual fund or exchange-traded fund (ETF) that aims to replicate the performance of a specific market index. Historically, stocks have returned around 10% annually over long periods compared to 2% or less for conservative options like cash and bonds.

 

 

I remained diversified across U.S. and international markets to reduce volatility. I also chose low-fee total market index funds and target date funds to minimize expenses.

 

By maintaining a high stock allocation when the kids were very young, I gave the money over a decade to ride out market swings before college. I resisted trying to time trades and instead stayed committed through ups and downs. While past returns don't guarantee future performance, stocks' long-term upward trajectory created substantial college savings for our family.

 

Add Extra Contributions Whenever Possible

In addition to my automatic monthly college savings deposits, I looked for ways to make extra lump-sum additions whenever possible:

 

 

Birthday and holiday money gifts went straight into college accounts.

●      We saved all or a portion of monetary gifts from family members as well.

●      I cut discretionary spending temporarily when possible to put any surplus funds toward their education.

●      My parents contributed to the kids’ 529 plan for gifting events like birthdays and Christmas.

●      Windfalls like tax refunds and insurance claim checks provided great opportunities for one-time college account boosts.

●      During particularly bountiful years, we made extra year-end 529 contributions for the tax deduction in that state.

 

Regularly contributing even small, affordable amounts consistently adds up over 18 years. But taking advantage of chances to make periodic large deposits can really supercharge college savings.

 

Give College Savings Gift Contributions

Encouraging family and friends to gift college savings for birthdays and holidays provided boosts to their fund over the years:

 

● We requested 529 plan contributions instead of toys or other traditional presents. Many plans now offer easy online gifting options.

● Confirmation, bat mitzvahs, graduations, and other gift-giving events brought influxes to their college fund rather than short-lived material items.

● We gave the kids toys and experiences when they were young then but shifted to long-term college savings gifts as they reached their teen years.

● Some relatives bought EE and I savings bonds as gifts that can be used tax-free later for college expenses.

● We made 529 plan donations to charities in their names for a few larger tax-deductible gifts from grandparents.

 

Getting the family involved in teaching them about college costs early made them appreciate the contributions even more. And over time, the deposits added up nicely.

 

Apply for Scholarships to Reduce Out-of-Pocket Costs

While my husband and I planned to fund a significant portion of their education, scholarships provide vital aid that reduces

 

 

reliance on savings and loans. Starting freshman year, I had them apply to numerous legitimate scholarship sources using free search tools and databases.

 

We focused their applications on academic, leadership, community service, athletic, cultural, and other awards fitting their skills and experiences. I made sure they spent time on essays highlighting their passions and accomplishments. We also researched opportunities from community groups, foundations, professional associations, religious organizations, local businesses, clubs, colleges, and state/federal programs.

 

The effort paid off with two academic scholarships.  Both kids worked hard to maintain grades and extracurriculars to keep qualifying. The financial assistance allowed us to preserve more college savings for graduate school.

Have Your Child Contribute Financially

While parents often pay a significant portion, getting children involved financially teaches responsibility. Here's how they contributed:

 

 

In elementary school, both kids put some monetary gifts and allowance into a savings account. We showed her the statements and compound interest over time.

 

● By middle school, they saved larger percentages of gift money, allowance, and earnings from chores, babysitting, and other work.

● In high school, they increased their savings habits even more with their part-time job income. We discussed budgeting, loans, the FAFSA, and more to make them informed consumers.

● They researched scholarship opportunities themselves and wrote applications each year.

● During college, they worked on campus 10 hours a week to help cover personal expenses and books.

 

Starting early with small contributions yielded big ownership and pride when they eventually left for college.

Understand Financial Aid Opportunities Thoroughly

Given college costs today, most families depend on financial aid. We made sure to learn about all available options:

 

 

● We submitted the FAFSA (Free Application For Federal Student Aid) starting October 1 of their senior year to qualify for federal, state, and college need-based aid programs.

● After getting their calculated expected family contribution from the FAFSA, I used net price calculators at target schools to estimate potential aid packages.

● Once acceptance letters arrived, we carefully compared likely out-of-pocket costs at each school based on the offered financial aid award packages. These outlined grants, loans, work-study allotments, and other assistance.

● I learned the critical differences between free aid like scholarships/grants vs. loans that must be repaid with interest. We were conservative borrowing.

● When a top-choice college offered inadequate aid, we successfully appealed for more based on our unique circumstances and financial restraints.

● They also leveraged competitive offers from comparable schools to negotiate additional scholarships.

Submitting the FAFSA and becoming educated on the financial aid process opened doors to making their dream colleges affordable.

Seriously Consider Community College as a Cost-Saver

Given substantially lower tuition costs, doing the first two years at our local community college before transferring to a 4-year university drastically reduced total spending on their bachelor's degree. Here were the benefits:

 

● They completed all general education courses and introductory math/science requirements at about 35% less cost compared to starting directly at a public university.

● They maintained strong grades with honors courses and scholarships at community college. The transfer credits applied seamlessly.

● Living at home and commuting for the first two years avoided expensive room and board bills.

● Our community college has a transfer agreement guaranteeing admission to the nearby state university. So their path was simple if they earned her associate degree.

● Careful planning and course selection ensured that they graduated on time after transferring. They will earn their bachelor's degree in just four years.

Starting at community college provided incredible value without compromising academics or time to completion.

 

Choose In-State Public Colleges and Universities

 

For huge cost savings over private institutions, the kids applied exclusively to in-state public schools. In 2021-22, average published tuition and fees were $10,740 for in-state public college students compared to $38,070 at private non-profits per the College Board - over three and a half times more!

 

With abundant public college options across our state, they found high-quality programs at a fraction of private pricing. And they received the public tuition rate through reciprocity at schools in nearby states as well. Avoiding the most expensive flagship colleges within our state system opened up affordable alternatives, too.

 

Sticking with in-state public institutions saved our family tens of thousands of dollars over the less feasible private university experience. We have no regrets.

 

Help Your Child Graduate On Time

Completing college in four years kept their costs contained. Here are some tips that helped them stay on track:

 

● They took honors and AP courses in high school to enter college, ready for freshmen-level classes. No expensive catch-up is needed.

● They researched programs and enrolled directly into their likely major. Switching paths adds unnecessary tuition and time costs.

● They planned course schedules without conflicts and completed all general education requirements efficiently in two years.

● They each took 15-18 credits per semester to stay on pace and considered summer classes when needed to get ahead.

● They mapped out the required courses semester-by-semester to graduate on time. Their advisor assisted with planning.

● They registered and secured housing promptly to avoid losing classes or delays. They also utilized campus tutoring support to excel in difficult courses.

 

Through proactive planning, diligent studying, and avoiding unnecessary changes, They graduated on time.

 

 

Always Have Backup College Plans

Despite best efforts, college plans can change. We prepared backup options:

 

● My kids applied to a mix of flagship, secondary state, and private institutions and then compared aid offers to identify the most affordable choices for our budget.

● Starting at community college first provides an automatic cost-saving transfer path if 4-year college expenses grow beyond reach.

● Taking a gap year to work and save more was a possibility if needed since some colleges allow deferring enrollment.

● If grades suffered, going to community college and transferring remained an alternative and more affordable pathway to a bachelor's degree.

● For students uncertain whether college is the right fit, vocational training offers skilled career options at a fraction of the time and tuition costs.

● Military academies like West Point or ROTC (Reserve Officers' Training Corps) programs provide full-ride college funding in return for service commitments after graduation.

 

Staying flexible and having backup options can prove invaluable if college plans need revising. Consider "Plan B" scenarios.

 

Despite rapidly inflating college costs, with strategic planning, dedicated saving, smart investing, scholarships, financial aid, family support, cost controls, and innate flexibility, funding a child's education remains very feasible for most families.

 

Through consistent effort and adaptation over the years, we successfully covered our children’s college costs in their entirety. Their future looked bright without the burden of excessive debt. Our family's sacrifices paved that path. If we can do it, you can, too, with determination, patience, and using available resources wisely. Stay positive, prepare for challenges, and take pride in giving your child the incredible gift of higher education.