As children, we’re often taught that every little bit adds up, practice makes perfect, good things come to those who wait. But as adults, we frequently find ourselves forgetting those lessons and mantras in our own daily practice, but continue to strive to teach them to our children.
Now, when it comes to saving for college, it’s almost natural to metaphorically find yourself looking up at the tuition mountain before your feet. Especially if you use a tool, even our own College Savings Planner. You can be left with the (completely natural) side effects of: anxiety, nausea, and fear. But let us suggest you take a deep breath and remind yourself that your goal and “end game” doesn’t have to be four years of private tuition with all room and board, fees, books, movies and convenience store trips included.
Now, lets talk about what’s realistic. And how that childhood lesson that “every little bit adds up” extends right back into planning for your own children. As you progress on your saving journey, keep the following in mind:
1. A dollar saved today can be two dollars you may not have to borrow and pay back later. You don’t have to fund 100% of what the College Savings Planning tool suggests. It’s merely a tool to give you an estimate of how much to save in order to stay on track with your goals.
2. You can save thousands, in increments as small as $25 at a time. Here‘s how small amounts can add up over time:
Saving $25 every month is equivalent to $300 annually or $3,000 every 10 years. With a hypothetical 6% growth earned annually on your investment, you’re looking at $1,100 earned over 10 years on your investment. This brings your savings total to about $4,100. That’s a little more than the current cost for a semester of resident tuition and fees at any of the University of Alaska campuses.
Saving $100 every month adds up to $1,200 annually or $12,000 over 10 years. With a 6% interest rate earned annually on your investment, you’d earn almost another $2,200. This brings your savings total to about $16,400. That’s nearly enough for two years worth of (current) tuition at the University of Alaska.
Saving your Alaska Permanent Fund Dividend (if you’re eligible for one) annually can also really add up. We encourage you to check out our Personal PFD Planner to see how saving half of your and your child’s PFD could potentially add up to over $35,000 over the years. And, if you were to win our $25,000 scholarship account, that number could be a whole lot more.
And, if we haven’t already outdone the clichés, we’ll add this one: It takes a village. Let friends and family help. Grandparents have a vested interest in your child’s future and are often happy to add to their college savings account instead of the clutter around your house, when it comes time to give gifts.
Have a bonus or an income tax return coming? Save a portion of them for college!
Just remember, you already made a great decision by starting a college savings plan. And we are there with you, from diapers to diploma!