This year, all 3 of our kids are each at different schools – a preschool, a kindergarten-only school, and a first grader in elementary school. We’ve got three different school calendars, three different sets of events, parent meetings, conference dates, class celebrations… and don’t even get me started on after-school activities. We’ve resorted to keeping track of everything with whiteboard calendars, a paper planner I carry in my purse everywhere and a shared calendar on our phones… and at least so far, I’ve managed to make it to all the right places at the right times without leaving any children behind. As involved as we are in their educations now, we also want to make sure we are saving and investing in the kids’ college educations for the future. But we had to find a way to make it as easy, and automatic, as possible. If I had to rely on remembering to make a monthly contribution to each of their CHET accounts on my own, it often would be forgotten. To make sure it happens, we set up monthly automatic contributions.
The Best Way to Save Money for Kid’s CollegeA 529 Plan is the best account to save money for a kids’ college education. If you are unfamiliar with 529 College Savings Plans, it is the most tax-efficient way to save for future educational costs. All gains on funds in a 529 plan are tax-deferred, and remain so forever, so long as the funds are ultimately used to pay for educational expenses.
Related Post: Why Use a CHET 529 Plan?CHET is the 529 College Savings Plan sponsored by the state of Connecticut. It is open to all investors but is even more advantageous to Connecticut residents due to state income tax deductions. Not only are the gains on the fund tax-deferred, but state residents also receive a Connecticut income tax deduction of up to $10,000 on contributions made to CHET. You can open a CHET account for your child in just 15 minutes with as little as $25. However, to reach your long-term savings objectives, it is important to make ongoing, regular contributions to your child’s CHET account, just as you would make regular contributions to your 401K or retirement account.
Related Post: How to Set Up a College Fund in MinutesIn our family, we find the easiest way to be consistent with these contributions is by automating them. CHET offers two easy automated contributions methods you can set up online in seconds.
How to Automate Contributions to Your Kids College FundThere are many methods available to make contributions to your CHET account. However, to be consistent and achieve your long-term savings goals, it is best to set up automatic contributions. You can set it, and pretty much forget it, other than a periodic performance review. First, determine how much you want to contribute annually. Divide this by your personal annual pay periods. (Are you paid monthly? Bi-monthly? or bi-weekly?). This will determine the dollar amount of your automatic contribution for each pay period. Next, you can choose from two automatic contribution options. You can elect to set up automatic contributions from your checking or savings account. Or you can set up automatic payroll deductions.
Automatic Contributions from Your Bank AccountYou can set up automatic contributions to your CHET account online in just minutes. All you will need is
- Checking or savings account number
- Bank routing number
- Name as it appears on the account
- Bank’s name and telephone number
Automatic Contributions via Payroll DeductionsYou can also automate contributions to your child’s CHET account via payroll deductions. If you work for a participating company or organization, your contributions can be made directly from your employer, just as you would make 401K contributions or pay insurance premiums. To set up payroll deductions, you will need
- Name and social security number
- Employer name, address, and telephone number
- Contribution amount per pay period
- Starting date for deductions
- Beneficiary’s name – if you have more than one child/account, you can list all of your accounts on one form
- Contribution allocation to investment options
Please note, that setting up payroll deductions cannot be completed entirely electronically. This part is paper-based, but actually quite simple – print three copies of the appropriate form for your employer; send one to your employer payroll department; mail one to CHET at the address on the form; and keep one for your records.An added benefit of payroll deductions is contributions minimums are reduced to $15 per pay period. Some families find it easier to achieve family financial goals, like saving for college, via payroll deductions because they never even see the money in their take-home pay. The contribution is automatically made and deducted from their paycheck. The automated method you choose is really based on your personal preference, while payroll deductions also permit for slightly lower contribution minimums.
The best way to save for kids college is with automated contributions to a 529 College Savings Plan. Be sure to follow my CHET-sponsored series over the coming months, where I will talk to all your most frequently asked college savings questions. If you don’t already have an account, learn how you can set up a CHET account in minutes here, and stay tuned for next month, where I will cover how to optimize your college savings through your account investment allocations. Follow me at Family Finance Mom on Facebook and Instagram to catch money tips to help you reach all your family finance goals.