7 Ways to Find Room in Your Budget for College Savings

A college education can be a deeply meaningful part of your child’s life and set them up for a solid future career. It’s also a substantial investment, so it’s important to start saving early if you think your child might want to go to college. 

Don’t let tuition costs scare you — a consistent savings habit can add up to a sizable contribution over time. Here are some ways to stay on top of your family’s finances and find ways to increase your college savings over time.

1. Start With an Overall Family Budget

Before you start fixating on college costs, you need to make sure you fully understand where your money is going on a regular basis in your daily life. Often, this involves writing out a more formal budget to get everyone in your household on the same page.

Different budget styles work best for different families. A few approaches to try include:

• Percent-based budget: The 50/20/30 rule and the 60/40 budget are two approaches to figuring out how much of your budget should go toward necessities, fun spending and savings. Using a mathematical rule of thumb offers some flexibility while keeping you within guidelines.

• Zero-based budget: The zero-based budget assigns every dollar a "job." That means planning in advance for where all your income will go. In other words, your income minus planned savings and expenditures should equal zero. This detail-oriented budget style is more time consuming but offers the most control.

• Category-based budget: With this approach, allot a particular amount for each expense category, like groceries, entertainment and utilities. Some people use cash envelopes for each category or track them in an app (YNAB, or You Need a Budget, is popular). This method can help you control areas where you're likely to overspend, since you’ve only assigned yourself a certain amount for, say, dinners out with the family.

This is a good opportunity to start getting your kids involved in saving for their own education, too.

2. Pay Attention to Your Bills and Credit Card Statements

If it's been a while since you reviewed transaction details on a credit card statement, you might be paying for services you no longer need. Canceling some recurring charges can free up extra money. 

While you’re reviewing bills, make sure you have a system in place to pay all your bills on time. After all, if you’re paying late penalties or interest, that’s money that could be going toward college savings. Set your bills on autopay or create a calendar reminder, and work on paying off your credit card debt, which tends to have very high interest rates. 

Even if saving for college is a priority for your family, it’s worth remembering that high-interest credit card debt can single-handedly wipe out any gains from your college savings. For example, let’s say you had a gangbusters year in the stock market and your child’s 529 plan made returns of 10%. That’s great! Now let’s say you’re paying 24.5% interest on your credit card debt. If you invested $1,000 but also have $1,000 in debt, you’ve still lost 14.5% overall this year. Getting your financial house in order across the board will make a huge difference toward becoming college-ready.

3. Set Small Short-Term Goals

One popular college savings guideline, the $2K rule of thumb, estimates that saving $2,000 per year of your child’s life would put most families on track to pay 50 percent of tuition at a four-year public college. (This assumes your investment would grow in a tax-advantaged 529 plan).

Saving $2,000 can sound intimidating. But that breaks down to saving roughly $39 dollars a week. Try setting up an automatic weekly transfer and commit to sticking to the savings goal for a few months. You may find that you naturally cut back on some impulse purchases or make other spending adjustments in response to your bank balance.

4. Boost Your Mood and Your College Savings

A well-functioning budget should have room for treats, like a fancy coffee or a movie night. You can incentivize your college savings (and be more intentional about “fun” spending) by “matching” your savings with special treats to yourself. 

Set a few levels for possible college savings for the month (e.g., baseline goal, stretch goal, “dream” goal) and each level earns you a new reward. You may also decide you’d rather find a cheaper or free version of your impulse treat (e.g., get a new book from the library instead of buying a copy) and save the cash.

5. Get a Savings Boost With an Individual Development Account

Some families who meet income and other requirements can qualify for an individual development account (IDA). IDA programs are available throughout the United States. They are typically sponsored by a non-profit or state or local government agencies, and they often match your savings contributions dollar for dollar (some IDA programs may offer higher or lower match rates). 

If you qualify for an IDA, there may be restrictions in what you can spend the savings on, what money you can contribute (e.g., only earned income and not gifts) or how you go about withdrawing funds.

You can also check whether you qualify to join a children’s savings account (CSA) program. Many CSAs are designed to help lower-income families save toward a child’s postsecondary education.

6. Build Fun and Free Traditions

Especially if your kids are younger, now is a great time to look for a new family tradition you can enjoy without spending much (or any) money. Sites like Meetup or Eventbrite can be good ways to find fun events in your community. If there are free museums, holiday festivals or outdoor activities like hiking trails or national parks near you, those can be opportunities to create family traditions that don’t depend on your budget.

7. Save Money on Food

Grocery bills are higher thanks to inflation, and your family still needs to eat. Luckily, thoughtful planning can help you keep food costs down:

• Plan a menu: The average family of four spends $1,500 annually on food they don’t eat. One Canadian study found that just over half of household food waste was avoidable. Planning dinners and estimating how much fresh produce your family will actually eat helps reduce food waste.

• Know yourself: Don't buy butternut squash just because it’s on sale when you know it'll rot on your counter; don’t choose dried beans when you hate food prep. Shop intentionally, but don't try to change your whole lifestyle.

• Get freezer takeout: If takeout is part of your routine on busy nights, one alternative is to stock up on your favorite entrees in the freezer aisle. They're cheaper than takeout and just as convenient to heat at home.

• Try a farm share: Some farmer's market vendors offer boxes of produce or meat for discounted prices. This is best if you feel creative enough to roll with unfamiliar ingredients.

Shop less often: The more often you’re in a store, the easier it is to overspend. Try shopping only once a week. If you forget an ingredient (e.g., zucchini), see if you can substitute with something else you have on hand (e.g., bell peppers). Saving for college, like earning a degree, happens a little bit at a time. The more you can make college savings part of a healthy, functional budget in your home, the more prepared you’ll feel when your child starts to plan their future education.

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