Saving for college and retirement can be difficult at its best, and seemingly impossible at its worst. How can the average American save for college or retirement without sacrificing money you need for day-to-day expenses? Here are a few tips:
Upromise: This is a college savings plan that you can link to your credit cards and debit cards. It works similar to credit card reward points, only instead of reward points, you get money for college. This is a great plan for saving for college because family and friends can help. You just log in to your free account, and anyone of your friends or family who want to help you out can add their cards. This way when they spend, they can help you save for college as well.
IRA: An IRA is a great way to save for both college and retirement. Depending on the kind of IRA you start you may get tax benefits, but additionally, you can choose the kind that works best for your situation, as well as your income.
Automatic savings plans: One of the reasons many people struggle to save money for college or retirement is because their plan is to save what is left at the end of the month, but usually there is nothing left. So, instead of waiting to see what you have left, start an automatic savings plan, where the money is deducted from each paycheck automatically so that you never even miss it. If you never have it to spend to begin with, you won’t get in trouble, and you will learn to manage with what you have, and in that way, you will be able to save for college and retirement.
529 plan: This is a savings plan designed specifically for saving for college. When you save using a 529 savings plan, qualified withdrawals are free of federal tax and most plans let you save in excess of $200,000 per beneficiary. One of the best parts of this savings plan is that there are no income limitations or age restrictions. This means that you can save regardless of how old your beneficiary is, or how much money you make. IRAs have imitations that are lower, and more restricted based on income.
401k: A 401k is a great retirement savings plan, especially since most employers will match a certain amount of contributions which means that you can really optimize how much you save, and reduce the impact you have on your monthly income.
Invest: Another great plan for saving for college and retirement is to invest your money, and use the dividends to pay for college and your life after retirement. A good portfolio of stocks, bonds, mutual funds, real estate, etc. can be a great way to pay for college and retirement later. If you buy rental properties, for example, you can live off the income you get from them when they are paid off, and you are retired.