On
the other hand, college expenses keep going up every year. Even if
you or your parents have established a savings plan for your education,
it may not be enough. This section of Money
Matters for Students is a guide through your options
when planning for an education.
Not sure where to start? Try our Battle Plan. It's an interactive
road map to the things you need to do.
If it's still several years before you're ready for college, Savings
is for you. It explains how to open a savings account and get started
saving for school. It also gives you some ideas of how to come up
with the money for school; even if your parents aren't saving for
you.
Not enough savings? That's where Financial Aid comes in. We'll explore
the various kinds of financial aid from scholarships and grants to
student loans and work study. We'll also blast apart some myths about
financial aid and give you some hints how to get it, no matter what
your parents' income bracket is. |
|
Starting A Savings Plan |
No
matter how close you are to entering college, it's never too late
to start saving. Even a few hundred dollars put aside from a summer
job the summer before you start school can make a big difference
in your first year.
Because even if you get the greatest financial aid package in the
world, you're still going to have incidental expenses like books
and phys ed uniforms that aren't covered. And then there's life's
little pleasures: like that ticket to the homecoming game or a pizza
after a movie. Savings help you get by.
If you're years away from entering college, now's the time to start
a saving plan. If you start with small, regular, monthly contributions,
you will have a substantial amount put aside by the time you graduate.
|
|
Getting The Most From Your Savings |
The
trick to making your savings mount up is simple. Make regular contributions
to your savings account. Even if they're small. In fact, 12 small
deposits of $50 a month will give you more money in the end than
one big deposit of $600 a year. Here's why:
What makes your savings grow is interest. In most savings accounts,
you start earning interest from the day you make your deposit. If
you deposit $50 in January, you'll earn interest on that $50 from
January through December. The same goes for the $50 you deposit
in February. And so on.
If, on the other hand, you wait until December and then deposit
$600, you haven't earned a penny between the previous January and
December when you make the deposit.
|
|
Picking A Savings Vehicle |
| Many
banks have special savings programs just for students. Look into
them.
At first, all you may qualify for is a regular savings account.
Go for it! But keep an eye on how much you have in your account.
A regular savings account is the lowest interest of all types of
saving vehicles. And your bank has a lot of ways you can earn higher
interest, once you have a balance of $1000 or more.
Higher interest savings vehicles mean your money earns more money.
That means that when you're ready to go to college, you'll have
more saved. Higher interest savings vehicles also lock your money
in for a period of time. Which shouldn't be a problem for you, because
you're putting the money away for college and won't need it right
now, anyway.
Some of these are:
|
| Certificates
of Deposit (CD's) |
You
literally "buy" one of these for a certain amount of time,
known as the CD's term. At the end of the term, the bank repays
you the money, or you can roll it over into another CD. It also
pays interest, which it may in one of two ways. It can pay it in
regular installments through the life of the CD, or pay it in one
lump sum in the end.
The general rule with interest in CD's is the longer the term, the
higher the interest. But there's something else you need to take
into consideration. During periods when everyone is giving low interest
rates, like during a recession, you don't want to get locked into
CD at those lower rates for too long. Because interest rates might
start going up, and you'll be stuck earning less than you could
with a different CD.
|
| Money
Market Accounts |
A
Money Market Account is a higher interest, checkable savings account.
That means you can write checks against your savings. Usually the
bank limits the number of checks you can write per month or year and
may also say that checks need to be a certain minimum amount. You
must keep a minimum balance in a Money Market Account.
|
| Premiere-type
Savings Accounts |
Some
financial institutions offer other types of savings accounts that
feature the bank's highest interest rates, but require a high minimum
balance.
|
| Mutual
Funds |
Mutual
Funds are not savings, but investments. Some banks offer them as
part of their investment services. They often allow you to increase
your savings at a rate higher than a savings account, but you also
encounter risk. This is because with a mutual fund you are participating
in the stock market. You are pooling your money with a lot of other
people's to buy a large number of stocks from a large number of
corporations. If the stock market moves up, chances are, your investment
will be worth more. But if it plunges, you could lose a lot, too.
|
|
Two Years Before College |
| Financial
aid officers will be studying the year before you start college
to determine how needy you are. If you show substantial savings,
they will consider you less needy.
Don't worry and don't let this slow down your savings program. Instead,
go to the Looking More Needy section and follow the advice on how
to "hide" your savings. |
