When it comes to New Year’s resolutions, most American’s make a list of 10 actionable improvements that they’d like to complete in the upcoming year. Within those improvements are the usual wishes to travel more, attend a gym regularly, and pick up a specific hobby. However, a recent Student Loan Hero survey found that two-thirds of people now have a financial New Year’s resolution for 2017, which is not surprising since nearly half of Americans are living paycheck to paycheck.
Saving for college continues to be the #1 concern for households, with the cost of college increasing by nearly 7% each year. Having an unprepared approach will not fix the looming issue at hand. So, how do you set up your child for success while ensuring your financial wellness at home?
1. Invest Your Yearly Bonus Checks
A recent study by the College Board found that a middle of the road budget for attending an in-state public college would cost a family an average of $24,061. If your kid has their eyes set on a private college, you might be looking at a yearly cost of $47,831 per year. These figures include tuition, room and board, book, supplies, and travel and personal expenses.
It might be tempting to spend your hard-earned bonus on luxuries such as a new car, a family trip, or to splurge on a few gifts for yourself but, if you use your bonus to save for college now, you will reap the benefits of having planned ahead later on, instead giving in to instant gratification.
2. Contribute Your Tax Refunds
Following the frame of thought above, among those who plan to save more money this year, 62% plan to save toward long-term goals such as saving for college, retirement, and buying a home, while 32% plan to save for short-term goals such as buying a new car or going on vacation.
Luckily, tax refunds are funds returned to you by the government on a yearly basis, which allows you to rely on them more frequently than a yearly bonus option. Using your tax return money to invest directly into a 529 plan for your child (or children) will allow you to actively save for long-term goals without further depleting your monthly income stream. Think of it as a yearly added bonus, funded directly by our government.
3. Participate In Payroll Deduction
One of the biggest financial regrets for 20% of Americans in 2016 was spending frivolously instead of actively saving. If you work for a company currently offering investing benefits for financial wellness, you may also reap the reward of payroll deduction. Payroll deduction allows an employee to allocate a specific percentage or dollar amount of their salary to be withdrawn directly from their paycheck, therefore eliminating the task of transferring the funds themselves. In recent years, 529 plans have begun to adopt the functionality of payroll deduction. However, although contributions to a 529 plan are not deductible, earnings grow federal tax-free and will not be taxed when the money is taken out to pay for college.
According to student loan lender Sallie Mae, fewer than half of all parents are saving up for their kids to attend college. Looking for options to simplify the process of saving for college will ensure your own success down the road.
4. Take Advantage of Employer Matching
Following the surge in offering financial wellness options as a benefit amongst companies in the United States, employer matching for 529 plans is also an option that more companies are now offering to reward loyal employees. According to a recent Aon Hewitt report, more than half of employees that had default enrollment paid a higher percentage of their paycheck into those programs than their employer matched.
Financial well-being programs have moved from being something that few leading-edge companies were offering to a more widespread strategy. Employers realize that offering programs that address the overall wellbeing of their workers can solve for countless challenges that impact the employees’ work lives and productivity, including their physical and emotional health, financial stressors and long-term financial goals.
5. Give The Gift of College
The United States alone currently has $1.3 trillion in outstanding student debt. The class of 2016 is the most indebted group of graduates in history. Each graduate carries an average of $37,172 in loans, an increase of 6% from 2015.
Letting your child know that instead of getting their sought after pair of limited edition sneakers you are investing that money in their future college fund is not the most popular option. They will, however, thank you when they are able to graduate college and start enjoying their hard earned salary without the hindering responsibility of carrying the loan payments for their student debt for an average of over 10 years after their graduation.