photo credit: keithbsmiley
Do you have kids? Do you plan on having kids someday? Is their a kid in your life that you kind of like and think maybe you want them to be able to go to college someday? If you answered yes to any of these questions now is the time to start saving for college. It continues to get more expensive and if you want your kids to start off their lives without the burden of college loans that you most likely had to deal with, start saving today.
Keep in mind that this is baby step 5. You should not start funding this while you are still in debt, and you also shouldn’t put this at a higher priority than your retirement. As I said in step 4, unless you think they want to feed you in retirement or you think spam tastes really good for every meal, retirement is a higher priority.
They can always take out loans like you did. That being said, if you are able, saving for your kid’s college is a great thing to do. Letting them start out life on their own without any debt is pretty great.
There are several special options when it comes to saving for college. 529’s and Education Savings Accounts (ESA) are the most popular options. This is a great resource for the details on 529’s and this covers the basics of Educational Savings Accounts. Basically they are tax advantaged plans that help parents save for college for their children.
Let me know what you think about waiting until step 5 to start saving for college in the comments below and then check out the rest of the series.
Step 1: $1000 Emergency Fund
Step 2: Get out of Debt
Step 3: 3-6 Months Emergency Fund
Step 4: Start Saving 15% for Retirement
Step 5: Save for Kid’s College
Step 6: Pay off the Mortgage as Fast as You Can
Step 7: Give, Save, Spend!