11 Strategies to Save for College With A Late Start
My kid is heading off for college and I have little saved, is there anything I can do?
One of the most common questions I’ve gotten as a financial coach is about late-start college savings strategies. So many of the college savings strategies you read about are for parents who started saving the day they found out they were pregnant. For those who have a late start saving for college, these strategies can feel overwhelming, if not outright impossible, to follow.
If you fall under this category, there is hope. Paying for your kid’s college is possible, but it’s going to mean using various resources, not just your income, to save. It will involve everyone- friends, family, child, community, kid’s school, to help you pay for college.
With planning and research, you can find strategies to help you pay for your child’s college, even if your child is older and you are just getting started.
Below are 11 late start college savings strategies:
Just start saving now
Save for college by shopping
Start a college savings account
Get your entire family involved
Explore your child’s interests
Get creative
Look in your community
Invest in College Entrance Exam Preparation
Figure out how much you really can afford
Have an honest conversation with your child
Do not sacrifice your or your child’s financial future
ONE OF THE TOP LATE-START COLLEGE SAVINGS STRATEGIES IS JUST TO START SAVING NOW!
I think for most people, the cost of college is so intimidating they save nothing. Especially those with a late start saving for college. Many think, “How much can the little bit of money I invest make a difference in saving for college?”
Every penny you save is a penny less you and your child will need to cover college costs.
If you’re not sure how much to save, consider using the ⅓ rule. You save enough to cover 1/3 of the total cost of college, pay ⅓ of college costs from your current income, and use student aid for the last ⅓.
Remember, this is a rule of thumb. If this strategy is not possible, other solutions still exist to help you pay for college.
SAVE FOR COLLEGE BY SHOPPING
A popular late-start college savings strategy is to use programs like Upromise and Backer to save money for college while shopping.
Both programs are free. You register for an account and earn cashback, either going into a 529 plan (both Upromise and Backer) or your bank account (Upromise).
You can earn cashback by:
Logging into your account and using a provided link to shop within that portal
Dine at one of the participating restaurants to earn extra dollars
Backer also has a gift feature that allows families to contribute directly to a child’s college savings.
START A COLLEGE SAVINGS ACCOUNT
Yes, a college saving plan is still an excellent late-start college savings strategy. This is because any amount you save helps reduce the overall cost of college. Investing the savings is also an opportunity for your money to grow to help pay for college.
There are two main types of college savings plans:
529 Plan
A 529 is an account specifically for educational savings with tax benefits. States manage 529 plans, determine maximum contributions, and determine if your contributions are state tax-deductible. There are two types of college savings, an investment account and a prepaid tuition plan. If you use the money for qualified educational costs, then all of the money is typically tax-free.
Coverdell Educational Savings Account (ESA)
Another type of college savings plan is a Coverdell Education Savings Account. Coverdell contributions are not tax-deductible. How much you can contribute to an ESA account is based on your modified adjusted gross income.
You can open an ESA at many financial institutions. The IRS limits your contribution by your modified adjusted income. You invest the contributions, and it grows tax-free. The maximum amount you can contribute is $2,000 for each child.
GET THE ENTIRE FAMILY INVOLVED.
This late start college saving strategy is a good option if you have a family that gives your child gifts. Get your family members or anyone who consistently gives gifts to your child to help pay for college.
Once you open a college savings plan, provide the information to family members (some companies even offer gift cards your family and friends can use to contribute to your kid’s college saving plan), and have them contribute. It’s easy, and I found many people liked not having to think about a present.
Give your friends and family links to your Upromise or Backers accounts to help you save for college.
EXPLORE YOUR CHILD’S INTERESTS
Get your child involved in various school activities to see what interests them, what they have a talent for, and what may lead to scholarships.
If your child excels and enjoys a class, ask your school if they offer after-school activities in that subject. Check your community or library for free educational events.
GET CREATIVE
Late start college savings strategies mean reimagining college. College can be a combination of credits from advanced placement classes, high school dual degree programs, and even a community college.
Your child can attend a community college for the first two years, then transfer to a 4-year college for their junior and senior year. Another option is for your child to live at home while attending college.
You can also help your child choose a job with significant educational benefits. Help your child look for employers that pay for colleges like government or non-profit organizations like the military, Peace Corps, and Americorp. You can help your child look for private employers that pay for college, like Starbucks.
LOOK IN YOUR COMMUNITY
One hidden late start college savings strategy is within your local community. Many local communities offer scholarships that go unused. Research your local community-based organizations such as:
Places of worship
Cultural groups
Fraternities/Sororities
Youth mentorship programs
Civic organizations (Rotary Club, Kiwanis, Optimist Club, etc.)
Community Centers
Your local Chamber of commerce
Start with your network and ask about scholarship opportunities.
INVEST IN COLLEGE ENTRANCE EXAM PREPARATION
One of the best late start college saving strategy investments you can make in college entrance exam preparation classes for the SAT or ACT. High college entrance exam scores can mean full scholarships or in-state tuition costs for an out-of-state college.
The SAT and ACT are different, so consider having your child take both exams to see where they do better. For example, unlike the SAT, the ACT has a science section and a larger section of Geometry and Trigonometry questions. The ACT allows students to use a calculator for all math questions. The SAT has sections where you cannot use a calculator. For these reasons, consider having your child take both the SAT and ACT to see which test they may do better.
REALISTICALLY FIGURE OUT HOW MUCH YOU CAN AFFORD TO PAY FOR COLLEGE
Now is the time to go online and start looking at various public and private colleges to help you gauge the cost of college. Yes, the numbers will be higher when your child is close to college age, but at least you have a starting point.
Next, use a college savings calculator to estimate how much it will take to pay for your child’s college education.
After, you can use an expected family contribution calculator to estimate your possible out-of-pocket college costs.
If your expected contribution is more than you can afford to pay, prepare to have an honest conversation with your child.
HAVE AN HONEST CONVERSATION WITH YOUR CHILD
As you prepare for a conversation about college costs, remember that your child has no idea of the cost of college. When I worked as a financial coach, most recent graduates said they had no idea how expensive their college costs would be, nor did they realize how big their student loans would be. They regret that their student loans have robbed them of their ability to pursue their passion, buy a home, and become financially stable. Many said if they could redo their college experience, they would either have lived with their parents while in college or chosen a cheaper college.
As a parent, you have to be the voice of reason, even if it means your child is temporarily disappointed. Your child being disappointed by not going to her first school choice is a lot easier than her paying off student loans for the next 20 years.
DO NOT SACRIFICE YOUR CHILD’S FINANCIAL FUTURE
Unfortunately, one of the late start college saving strategies I see many parents using is going into significant debt or pulling money out of their retirement plan to pay for their kid’s college. Your financial security is a priority. This means ensuring you have adequate savings for unexpected events, you aren’t carrying a credit card balance, and saving enough to retire.
Yes, we all want to put our kids first. But what’s kinder, sending your kid to a school that won’t bankrupt you or your kid’s future, or for you to spend the next 20 years sleeping on your child’s coach because you didn’t take care of your financial security?
RECAP THE 11 LATE START COLLEGE SAVINGS STRATEGIES
Below is a recap of different ways you can have to save for college, even if you don’t have a lot of money saved for college:
Just start saving now
Save for college by shopping
Start a college savings account
Get your entire family involved
Explore your child’s interests
Get creative
Look in your community
Invest in College Entrance Exam Preparation
Figure out how much you really can afford
Have an honest conversation with your child
Do not sacrifice your or your child’s financial future
NEXT STEPS
You can help your child prepare for college, even if you’ve had a late start. For elementary-age kids, consider starting a college savings account.
Parents of middle school-age kids can start talking with their kids about college choices being a joint decision while still saving for college.
If your child is in high school, contact your child’s school counselor, ask for a frank assessment of where your child academically and athletically stands, and ask about their chances of getting a scholarship. Go online or ask your college counselor for college entrance exam preparation courses in your area.
With research and creativity, you can find a way to help your child pay for college in a way that will not hurt you or your child’s financial future.
