Author bio: Ksenia Yudina is the Founder and CEO of UNest, the money app for your kids’ future. Ksenia is an entrepreneur and financial expert with over a decade of experience in the financial industry.
As a wealth manager she helped affluent parents access smarter saving and investment options. She founded UNest to extend the same financial acumen to parents across all income levels and backgrounds. To date, UNest has helped tens of thousands of parents save millions of dollars for their kids’ future.
Major sticker shock! During a normal year, back-to-school shopping is expensive enough. But this year, due to inflation and supply constraints, parents are experiencing a new level of pain in their wallets.
According to a survey from the National Retail Federation, parents spent a whopping $37 billion on supplies for grade school-aged children, up from $34 billion last year.
The fact is, no matter how you slice it, back-to-school is always an expensive endeavor, and it’s surprisingly, a year-round activity.
With enough preparation, however, families can mitigate some of the financial burden and figure out a long-term plan to pay for educational expenses.
Create a Budget
The best way to make sure you don’t overspend is to create a budget and stick to it! Ideally, this should be done before the school year starts, but you can always plan for things that may pop up throughout the year, or for years to come.
Make sure to account for transportation costs, clothing, school supplies, and even fees for extracurricular activities. This year, an added cost may include masks for children or extra hand sanitizer.
If you can afford to build a cushion, or a rainy day fund, you should make sure you have enough set aside for unexpected expenses.
Maybe your child’s computer stops working or they need extra supplies for a school project. Knowing that you won’t have to take out a loan or dip into credit cards will give you peace of mind.
Start Saving for Higher Education
Let’s face it, college is expensive and student debt in this country has reached an eye-popping $1.7 trillion. According to a report by Trends in College Pricing and Student Aid, $26,820 is a fair budget for a student attending a four-year in-state university.
Parents should start thinking about saving for college the moment a child is born. There are a number of financial solutions available that help families build a nest egg for their kid’s future. Not just for education, but all the key life stages your kids will go through.
Additionally, when your child is young, time is a gift. The younger your child is, the more time your money has to compound and grow. Each year, you earn more based on the previous year’s gains and it creates a snowball effect.
Custodial Accounts to Fund Your Child’s Future
UTMAs or custodial accounts are a great, flexible option to start saving. Not only do parents receive tax advantages, the money can be used for anything child-related.
That way, if your kid receives a college scholarship or decides to take an alternative route, they can still access the money without penalty.
A custodial account is opened by an adult for a minor and transfers to the child once they reach the age of majority, which can be 18-25, depending on the state.
Again, the benefit of these types of accounts is that if you decide not to use the money for education, it can be used to fund a business, a wedding, or even for a future down payment on a home.
Just Start and Good Things Will Follow!
No matter what your financial situation, it is important to start planning and saving for this year’s school needs, next, or even 18 years from now.
Back-to-school is the perfect time to get a plan in order because it represents a fresh start for most families. Especially this year as in-school resumes for most.