Step 5: Education Savings Plan for your children

After completing the first 4 baby steps, you will now be debt-free except for your home loan {if you have one} with a fully funded emergency fund, and you are saving 15% of your income for retirement.

Next up is saving for your children’s education. {We don’t have any kids yet, but we plan to be ready to start an education savings plan for them when they are born.}

How much should we save for education?

In order to have enough money saved for your children’s education, you need to have a goal. Determine how much per month you should be saving at a good interest rate in order to have enough for college or university.  You can calculate what you will be able to save for your children’s educations on Old Mutual’s website using their education budget calculator.

Never save for college using:

  • Insurance
  • Savings bonds (only 5-6% growth)
  • Pre-paid college tuition (only 7% inflation rate)

According to Dave Ramsey, the best way to start your children’s education savings plan is through Education Savings Accounts. Remember, a good education is possible without student loans!

{The image used with this article is from Old Mutual’s Education Calculator Website}.