It is important for all parents to help save up for their kids’ college. Many people choose to do this by establishing a college fund for their kids either before they are born or when they are born. It is important to set one up as early as possible so that your child’s college fund has time to earn money and mature before they need it. It can be extremely expensive for college students to pay for college on their own and they may end up with massive debts without help. Saving up for your children’s college is not as painful as you may think, either, as even small sums on a regular basis make for a large total investment over time.
You may not think that a few thousand dollars a year is very much money when it comes to paying for the tuition of your children. But any amount, given enough time, is far from paltry, and will pay for a significant chunk of your child’s tuition and expenses if not all of it. Remember: the more time you give your fund, the more time it has to earn compounding interest and grow. An easy rule to follow and remember is that if you are earning ten percent interest on your money, then your money will double every seven years.
So if you prepare your fund when your child is born, then assume that you have eighteen years for your money to compound before it is used to pay for college. Let’s say you can afford to put just under two hundred dollars a month into the account, coming out to about two thousand dollars a year. The initial two thousand will have become four thousand and then eight thousand, and then around twelve thousand dollars by the time it is needed. That is only the money from the first year that you began feeding into the fund as well. For each year that you contribute money to a fund like that, it will have time to compound and mature in a similar fashion. Even assuming that college will cost a hundred thousand dollars, your planning ahead by saving in a college fund has more or less paid for college for your child.
Without saving for college, your child will likely have to take out student loans in order to afford college on their own. These loans will be massive and incredibly intimidating considering when your child finishes college they will not have a job and will have tens of thousands of dollars in loans to pay back. Even to a well established individual, that much debt is easily overwhelming. Give your kids a better life and help them by saving for college.