ADOPTING THE BABY STEPS: SAVING FOR COLLEGE

courtesy of Flickr

When everything is settled in with your emergency and contingency funds, instead of jumping to your retirement fund, complete all responsibilities and work with your children's college fund first. It would be good to think about your retirement fund but it would still be a number of years away while children are growing quickly. The moment you started a family, it would only take around 18 years before you got a kid to send to college. While, hopefully, it would still be double those number of years until retirement.

With the lesser time frame for the children, it would be better to focus on a year or two solely on saving for their college fund. Allot two years focus on each child. So if you plan or already have 2 or more children, double the number and that would give you the total number of years you are supposed to save for college funding solely. The two years may not even be enough for an employee to save for each child, but this is just the focus or saving solely for one baby step. The succeeding years, you might want to divide the savings among your retirement fund and the children's college fund. 

Baby steps 4 and 5 together. 

This is a new scheme which combines saving for both college and retirement fund. So give two years for each child and save their college fund. After the two years, divide your savings to college fund and your retirement fund. Paying off your retirement fund earlier ill be requiring you to give lower payments. The installments paid on the retirement fund will be earning interest which will be possible to suffice the inflation on your senior years.

How to plan on the first two years for college funding?

It is not just checking on the tuition fees of each university, but compute all the expenses that your children will be asking from you.

• Start with learning the fees of universities in your local and also in another city. You can decide on which to start with. After all, you are going to save while your children are still young, thus, there is no point of asking a 9-year old on which university he would like to go to in college. To be at a safer side, check on the university out of your town which offers the lowest fees and use that as your basis. Another alternative is directly targeting potential universities you would like your child to attend to.
• Include the expenses for books, school tools and gadgets that your children will be required. Since this is not yet certain for now, you can make an assumption that at least 15% of the school fees would be for projects and tools needed at school.
• Learn the way of living in that place, check out the people's lifestyle. Does the place offer cheap board and lodging? On the other hand, scout for information about dormitories of schools too.
• Do not forget to include the inflation of all expenses in your computation. From the school fees to transportation, food and housing, inflation should be computed.

How to save for the college fund?

courtesy of SLU FB

• You can open yet another account for your children's college fund. This will assure you that you have divided all savings properly. The only drawback is that every pay day or day of deposit, you will be carrying so many accounts.
• Another thing is to have it included in your contingency fund. Remember that your contingency fund is something you are not to touch unless you are out of job so your college fund will be safe. Another good thing of pooling your fund into this account is the higher interest rate your fund will be earning as you keep bigger lumpsum.

Know more about the other Baby Steps.