How do you eat an elephant? One bite at a time.
The same sentiment applies to tackling a big goal such as saving for college—break it down into manageable steps, then put one foot in front of the other.
Following the three steps below can help you move closer to your college savings goal.
Open an account
The best time to start saving for college is right now. Start by choosing the best type of account to hold your college savings. For many investors, a 529 college savings plan provides the best mix of benefits—such as tax breaks, high contribution limits, and flexibility—to help you save.
After you’ve chosen an account, you can select your investments. Choose your investments based on your risk tolerance (how you feel about market fluctuations) and how much time you have to save.
Many 529 investors choose an age-based option, which is a complete portfolio that automatically adjusts over time so your investments become more conservative as your child gets closer to college. Age-based options make it easy to maintain a balanced portfolio with minimal effort.
Create a savings goal
Families who have a plan to pay for college save 46% more than families without a plan, according to Sallie Mae’s “How America Saves for College 2015” study (conducted by Ipsos Public Affairs).
A plan can be as simple as identifying the total amount you want to save. Keep in mind that you may not be able to save enough to cover 100% of your child’s college expenses—in fact, most people don’t. The Sallie Mae/Ipsos study reports that families (parents and students) typically cover about 43% of total college costs through income and savings (529 college savings accounts and bank accounts).
Once you’ve decided on the percentage of expenses you can realistically cover, use Vanguard’s college savings planner—which factors in your child’s age, the type of school he or he might attend, and the amount you’ve already saved—to figure out how much you’ll need to save each month or year. (And remember that saving for college can be a family affair—relatives, friends, and even your future grad can contribute.)
Make regular contributions
Making small, regular contributions can help you reach your goal over time—no big, lump-sum investment needed. One of the simplest ways to stick to your plan is to set up recurring contributions (also known as an automatic investment plan). When you set up an automatic investment plan, the amount you choose to contribute will be deducted automatically—before you get a chance to spend it.