When you hear the word ‘habit,’ the first thing that probably comes to mind is a behavior, perhaps one that’s not so good for you, that’s hard to break. But we often don’t think of the fact that there are good habits that we should be striving to form. Unfortunately, the better the habit, the more difficult it seems to start. One such habit is putting aside money for the future, whether it be starting your retirement planning, building an emergency car repair fund, or saving for your child’s future college expenses.
The ideal time for families to begin saving for college also happens to be one of the most challenging times to get started: when kids are elementary age or younger. When kids are young, you may spend the majority of your time just keeping up with everything that’s going on in the moment as they grow and develop at a breakneck pace. College seems so far off and there’s so much to do now, that it’s easy to convince yourself that there’s all the time in the world to get started. The problem is, it’s just as easy to keep saying that as time goes on. Before long you wake up and your child’s a junior in high school, looking at colleges and you’re suddenly asking the question, “How are we going to pay for this?”
Ultimately it’s up to you to make the commitment early on, but fortunately there are programs that make it easier for you to start the college savings habit. Tax-advantaged, college-specific savings accounts, known as 529 plans are the best way for families to prepare for this major expense. With a 529 plan, all account earnings and withdrawals are free of federal income tax when used for qualified higher education expenses.
You may have heard of Washington’s 529 Plan —the Guaranteed Education Tuition (GET) Program. GET is a prepaid college tuition plan that offers the investment security of conventional savings accounts and bonds, but with tax-free growth and the potential for much higher returns. Savings in a GET account are guaranteed to keep pace with tuition costs in Washington, but can be used to pay for school nearly anywhere in the country, and even in other countries.
The GET Program has several flexible savings options that help take the pain out of saving for college. With GET you simply pay-as-you-go when you have funds available. Another option is to set up automatic monthly payments, or even have deposits automatically deducted from your paycheck (it’s easy and free for your employer to participate in GET payroll deduction). The monthly payment option combined with payroll deduction is an especially effective way of establishing a regular habit, as it essentially takes care of itself once you’ve set it up.
The sooner you start saving for college, the more time you have to add funds and the more time your account has to grow. If you’re finding it difficult to find the funds to get you started, consider looking at some of your other habits, and seeing if there’s any room for adjustment. For instance, the ‘latte factor’ may be a bit cliché at this point, but consider the following example. If you put away just $5/day by brewing your own coffee instead of stopping by the coffee shop, you could add over $18,000 to your college savings in 10 years! However you decide to save for college, the key is to start early and contribute as often as possible.