Student Resources

Saving for your child's college education is a significant financial undertaking. With tuition costs consistently on the rise, it's more important than ever to approach college savings with careful consideration. At Financial Partners, we’re passionate about supporting our Members through every stage of their financial journey. With that in mind, don’t fall into these 3 common pitfalls when planning for your child’s higher education fund. Plus, read all the way through for a bonus tip that could help you save thousands. 

Mistake #1: Don’t be a Pro at Procrastination

One of the most common mistakes parents and students make is waiting too long to start saving for college. They underestimate the costs and assume they have plenty of time to catch up. This delay can be detrimental, as compound interest is a powerful ally when it comes to saving. The longer you wait, the harder it becomes to accumulate the necessary funds.

How to Avoid This Mistake

• Start saving early, even if it's a small amount
• Set clear savings goals and milestones
• Consider automatic contributions to ensure consistent saving

Mistake #2: Diversify Your College Savings

Another common mistake is putting all college savings into a single type of investment or asset class, such as stocks. While stocks can offer high returns, they also come with a significant level of risk. Neglecting diversification can leave your college fund vulnerable to market fluctuations.

How to Avoid This Mistake

• Diversify your college savings portfolio with a mix of insured and insured assets.
• Consider safer options like opening a Certificate (AKA CD), money market, or a high yield savings account for a portion of your savings.
• Rebalance your portfolio periodically to maintain the desired asset allocation.
• Consult a financial advisor for personalized guidance.
   

Mistake #3: If you fail to plan, you’re planning to fail

Many families assume they won't qualify for financial aid and therefore do not proactively plan for it. This can be a costly oversight because financial aid, including grants and scholarships, can significantly reduce the burden of college expenses.

How to Avoid This Mistake

• Complete the Free Application for Federal Student Aid (FAFSA) as soon as your Junior year of high school.
• Research and apply for scholarships and grants.
• Understand the various types of financial aid available and eligibility criteria.
• Consider your financial aid strategy as part of your overall college savings plan, which may include the use of a 529 plan.

Bonus: Take advantage of the 529 Plan! 

A 529 plan is a tax-advantaged savings account specifically designed for high education expenses. It offers several benefits, such as tax-free growth and withdrawals when used for qualified educational expenses. By incorporating a 529 plan into your college savings strategy, you can maximize your savings potential.

• Open a 529 plan early to take advantage of compounding growth.
• Contribute regularly to your 529 plan and consider automatic contributions.
• Explore state-specific 529 plans for potential tax advantages.
• Utilize your 529 plan in conjunction with other savings and financial aid sources to cover college costs efficiently.

Saving for college is a long-term commitment that requires careful planning and attention to detail. By avoiding these top three mistakes you can increase the likelihood of successfully funding your child's college fund, plus the added advantage of a 529 plan to optimize your savings and tax benefits. Start early, diversify your investments, consider financial aid, and leverage the benefits of a 529 plan to secure a brighter future for your child without unnecessary financial stress.