Some parents start college savings plans for their kids at an early age. Others prefer that their kids put away money from jobs and use financial aid to help pay for the rest of school. While these choices typically take place in the confines of a home, saving for college does provide benefits whether you are a student or a parent of an aspiring student.
Affordability and Education
The most central reason it is important to save for college is that it makes it easier for a student to make a decision to go to college if he already has the money. Whether parents participate or the student saves his own money, knowing there is money set aside for educational pursuits is helpful. Additionally, some parents make enough money that it is difficult for their kids to get school fully paid for by financial aid. Education is important to attaining goods jobs and achieving high income.
If a person wants to go to school, his methods of payment including savings, scholarships and loans. Academic prowess or athletic success can help you earn scholarships. However, few students can cover all costs for tuition, room and board through scholarships. This reality leaves savings and financing as methods of funding. By saving, you avoid taking on debt as parents, or graduating with high amounts of debt as the student. Significant school loan debt and interest restricts your ability to buy a house and start on the right financial foot as a young adult.
A key debate for parents is whether to save for retirement or college. CNN Money's "Guide to college savings plans" indicates that parents help themselves and their kids more by saving for retirement. However, prospective students who save their own money when parents can't or won't help, can put themselves in a better position to start saving for retirement early on. When you don't have significant school debt, you can put more of your early income to retirement. This ability helps you get to a point where you can help your own kids save for school.
Teaching Good Spending Habits
A key financial responsibility for parents is teaching kids good spending habits and the importance of saving money versus borrowing. This lesson is simple by comparison when you have a kid save his allowance to buy a toy versus loaning him the money. With college, you are talking about thousands of dollars. Helping your kid start college savings early in life, and maybe matching his savings, helps instill the importance of saving money to buy something as opposed to relying on debt.