My grandfather always said that education is something that could never be taken away from a person and despite the importance of education, the rising cost of college tuition is something that is always on my mind.
A recent story on NPR stated that during the last 20 years, the cost of college tuition has increased faster than the rate of inflation. I worry that while we started earmarking funds to help pay for our kids’ college costs and add a little bit each month, we won’t be able to help them as much as we like in 10 more years.
Rather than settling on not sending them, there are ways that we are working to save our pennies for the future. We do as much as we can to ensure that we keep as much of our hard earned money as possible. Sinking money into our IRAs and depositing money into our childrens’ 529 accounts for college helps to shelter our hard earned cash from being taxed by Uncle Sam.
But what if you aren’t saving money for the future and would like to?
Start small. If it seems like you might not have any room in your budget to invest in the future, think about any luxury item you might be able to give up. Maybe it’s a cup of coffee once a month, switching to a generic brand rather than purchasing name ones, exchanging babysitting services with another family rather than hiring your fave high school student, or dinner out as a family. Designate any savings for your investment.
Shop around. These days it seem that savings accounts yield very little interest and if you’re saving money, you not only want it to serve as a tax shelter but also earn the highest interest possible. You owe it to yourself to shop around. Banks offer varying interest rates on savings and other accounts. Since banks and other financial institutions want your money, they’re happy to consult with you for free. And while it may seem like a half of a percentage isn’t very much, over time that small amount could end up being fairly substantial.
Direct deposit. Sending your funds directly to a designated account ensures that they won’t be spent on other items and makes it easier to save.
Become knowledgeable. The more you know, the less intimidating tax sheltering your money becomes. Ask friends for recommendations of financial planners, talk to your local bank, and read up on tax sheltering your income through things like 529 college savings accounts, Educational Savings Accounts (ESAs), prepaid tuition plans, and Roth IRAs, or UPromise accounts.
Model savings. Be open and honest with your kids when it comes to money. Perhaps they don’t need all the details of your family finances but tell them why it is they can’t have that toy that they are lusting after in the toy aisle. Encourage them to save and help them learn to budget for their futures.