5 Ways to Save Without Feeling the Pinch
Think you're too strapped to put away any extra cash for college? Think again! Here, Margaret Atkins Munro, author of 529 & Other College Savings Plans for Dummies and mother of a 12-year-old son, shares five secrets for finding "hidden" money.
- Tip #1 Stash away pretax earnings through a "Dependent Care Account" at work. Many companies allow workers to deduct up to $5,000 in pretax dollars from their paycheck and use the money to cover childcare expenses, such as day camp, preschool tuition, and after-school care. Not only does this save you money on taxes, but it also can be an easy savings vehicle for college. How so? Once you get reimbursed for your eligible expenses, just deposit the check (or the portion of it you don't need to pay bills) into your 529 college plan.
- Tip #2 Reallocate childcare expenses and preschool tuition to a college savings account when your child starts elementary school. Some families pay more than $1,000 a month for daycare and more than $850 a month for preschool. But when your child goes to public kindergarten, those fixed expenses will go away -- and you can stash most of it into a college savings account. Just make sure you're fully funding your retirement first.
- Tip #3 Use "rewards" credit cards. Get a card that gives you a "point" for every dollar you spend. Charge most of your household expenses and big-ticket items so you build points superfast. Rather than redeeming them for prizes, take the cash back for your child's college account. You can also use a credit card that's affiliated with a so-called "affinity program" -- such as Upromise.com or BabyMint.com -- that contributes money toward a college fund when you buy qualifying products at participating stores.
- Tip #4 Bank your coins. If you spend only bills and put all your change in a jar, you'll save up to $400 a year. Set aside one day a month to take your kids to a bank that has a free coin-counting machine. This is also a good way to teach them about money and simple math.
- Tip #5 Ask grandparents to help. Have a frank talk with your parents or in-laws about the high cost of college. Then, suggest they reduce the number of presents they give your child and instead deposit some of the money into her college account. Your daughter won't notice if she gets one fewer stuffed animal or DVD on her birthday -- but cash contributions over a 10- to 15-year time period, no matter how small, can really add up.
Copyright © 2008. Used with permission from the February 2008 issue of Parents magazine.