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Budgeting for an Education

January 23rd, 2012 at 02:31 pm

The cost of college continues to increase, and the current economy makes it difficult to budget for a college education. Whether you're studying for a nursing degree or an engineering degree, a college education is expensive, so you must begin preparing early. This process requires you to identify the cost of going to college and ensure your savings will be greater than the expenses.

Expenses

An effective budget must include basic living expenses such as rent and food. On-campus housing is generally less expensive than living off-campus. You can also reduce your spending by getting a larger apartment and splitting the rent with roommates. The campus cafeteria is typically less expensive than eating out. You can also cut your food costs by buying groceries while taking advantage of coupons and sales. Your budget should include a fund for miscellaneous expenses such as incidentals, entertainment and snacks.

Expenses that are specific to education consist primarily of the tuition, which typically includes laboratory, building and student fees. Additional school expenses include books and other supplies. You will typically sell the textbooks back to the college at the end of each semester. Used books usually cost about half the price of a new book. These education expenses can vary considerably between semesters.

Savings

The average cost of attending college was $26,273 as of 2010, according to The Employment Times. This represented a 4.4 percent increase over the previous year, and this trend is expected to continue. So what's to be done?

A 529 fund is a common savings program that can be administered by a college or the state. The primary advantage of these programs is that the withdrawals are generally tax-free. However, a 529 fund is intended for long-term savings and places restrictions on when you can withdraw money.
The key to saving for a college fund consists of performing small actions over a long period. Savings accounts typically earn compound interest, meaning that the interest itself also earns interest. Assume that you begin depositing $100 per month into a savings account when your baby is born. If the account earns compound interest at the rate of 3 percent, the account will have over $28,000 by the time your child is 18 years of age.

It is important to choose a specific amount that you can contribute to a college fund. Long-term savings for an education fund is easier when you donít have an opportunity to spend the money. Many employers have payroll plans that automatically deduct a portion from your paycheck and deposit it into a savings account.

If you find that you have difficulty saving money, there are many free online budgeting services such as Mint, which collates all of your financial accounts together online or on your mobile device, categorizes all of your spending, allows you to set a budget, and helps you reach your savings goals. Alternately, Quicken is a desktop program that works the same way.
Many find the cost of college prohibitive, and consequently balk at the thought of going. However, with the changes in the job market, employers are becoming increasingly choosy about whom they hire, making a college degree more important than ever before. With a little planning and foresight, you can achieve your dream of being a college graduate, and improve your odds of finding the job of your dreams.

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