After you’ve started investing 15% of your household income for retirement in Baby Step 4, it’s time to think about your kids’ future. Baby Step 5 is all about saving for your children’s college education, in a smart, intentional way.
Why This Step Comes After Retirement
You might wonder why saving for your kids’ college comes after saving for your own retirement. It’s simple: your kids might not go to college, but you will retire one day. Taking care of your financial future first isn’t selfish, it’s wise. When you’re financially secure, you’ll be in a better position to support them without becoming a burden later on.
How to Get Started
Once your retirement plan is on track, you can begin saving for college through these popular options:
Education Savings Account (ESA): A tax-advantaged way to save up to $2,000 per year per child.
529 College Savings Plan: A flexible, state-sponsored savings plan that grows tax-free when used for qualified education expenses.
Both options offer great benefits, especially when started early and funded consistently.
Avoiding Student Loan Debt
By planning ahead, applying for scholarships and grants, and saving steadily, your kids can walk across the graduation stage without a mountain of student loans. It’s a gift that can set them up for long-term success.
EveryDollar Can Help
With EveryDollar, you can build savings goals, track your progress, and make college savings part of your monthly budget. For more info on saving for college, click here.
Next up: Baby Step 6, paying off your home early!