Let me show you how to save for kids college in the #1 most painless way
How on earth can I write that blog post title? Where I'm not only telling you that saving for your kid's college education is doable, but also that there's a way I know of to make it painless?
I'm a Mama Bear. I get it. I know how daunting the $100K+ price tag appears (even if I still do have 16 years left to figure it out + am hanging my dreams on our little guy getting some good scholarships as part of a 529 college savings plan).
It's a mighty big task.
But I'm here to help solve how to save money for college.
First, a little background to how I discovered this trick.
Our Discovery of Painless End-of-Year Savings
The end of every year is a pretty expensive time for us, just like it is for many families. There are holidays with food + gifts to purchase. There's airfare if we want to visit my family (as we often do), who all live 1,550 miles away. There's end-of-the-year Roth IRA contribution catch-ups to make to ensure we've maxed those out. There's our $450 Homeowner's Association fee. There's our flood insurance renewal fee.
It just doesn't seem to stop.
I had signed up for this free savings app (now $2.99/month) called Digit.co sometime in the summer of last year, and forgotten about it.
Well not entirely (it sends me daily text messages about our checking account balance).
One day when faced with all of the bills that came at the end of last year, I suddenly realized I had some hope. This app had been setting aside $5 here, $12.27 there from our checking into a savings account for several months. How much money was in there?
When I looked in November, I found it had squeezed a whopping $509.97 into savings for us!
And that $509.97 this free tool set aside for us? It all came in just two months' time − between August 25th and October 24th to be exact − with an average of $18.21 taken out on each withdrawal.
Now…let's turn back to the task at hand: how to save for kids college in the most painless way possible.
The College Savings Trick to Make Savings Painless
In two months, that free app was able to find an extra $509.97 sitting in our checking account. So what do you think it could do over a span of, say, 10 years?
I'd imagine it could create miracle savings for you + your college-aged kiddo, at least partially solving the question of how to save for kids college.
It's not likely you'll miss $11.16, or $8.87 every few days (that's why I consider it painless, just like setting aside extra money for our end-of-year expenses last year). But what would you really miss? Knowing that you had set aside thousands of dollars over the years for your child to attend college.
The Workaround to their Low-Interest Earnings
One downside to using Digit.co when figuring out how to save for kids college is that they don't give you interest for saving your money in an account with them.
That’s their business model − they save it for you automatically, and they earn the interest.
However, they do give you “Savings Bonuses”. Every three months you earn a little bit ($0.05/$100 saved, based on average Digit balance over the last three months) for keeping your money with them.
So what you will want to do is whenever you get a significant amount of money built up, move it back to checking and over to your designated college savings account.
Some More Facts
Still feeling squeamish about an app automatically withdrawing varying amounts of money from your checking account to your college savings? Here's a few more facts:
- FDIC-Insured: Your account is FDIC-insured, just like a typical savings account.
- No-Overdraft Guarantee: Should they cause an overdraft on your account, they will pay you back in lost money due to fees. Check out Digit’s No-Overdraft Guarantee on their FAQs page for more info.
- You Can Set Parameters: When you sign up for this app, you're signing up to daily text messages to your phone with your daily checking account balance, recent transactions, and how much they withdraw from your account. You can cut these all out if you'd like. You can also set up some parameters on the amount being saved by texting things like “save less” or “save more”. You can also hit “pause” for any number of days you would like. Amounts are transferred every 2-3 days, typically between $5-$50 at time, depending on their algorithm's determination of your checking account's ability to handle the withdrawals (they analyze your bills + spending + income to understand how much to withdraw). Also, at any time, you can just text “withdraw $200” or whatever amount you'd like, and it will go back into your account rather quickly. When I tried this option out, it was one day later that I saw the money back.
I think this really could be a lifesaver for you. Think about it: every time you see a “Hello Digit Inc” appear in your checking account, you can smile knowing that just a few more bucks has made it into your child's college savings fund. How to save for kids college just became a little bit easier (and definitely more painless).