If one of your goals is to help pay for your child’s college education, it’s important to have a plan in place early.
Estimating the full cost of college, identifying a savings goal and establishing a savings plan can help you work toward your goal with confidence.
You may also want to consider non-traditional funding strategies such as asking grandparents and other family members for college contributions instead of gifts, earmarking tax return refunds or even applying credit card rewards to a 529 plan.
The lifetime benefits to those earning a college degree compared to only a high school diploma can be considerable, including:
By one estimate, a person with a bachelor’s degree makes 75% more over their lifetime than a person with a high school diploma.2 The challenge is that the cost of college education has risen dramatically in recent decades.
It’s important to put a consistent, well-planned education savings and investment strategy in place early. The sooner saving begins, the more time money has to potentially grow.
If one of your goals is to financially help your children through college, it’s important to put a consistent, well-planned savings and investment strategy in place early. The sooner saving begins, the more time money has to potentially grow.
Here are five steps that can help you identify and work toward your college savings goals.
College expenses vary based on a variety of factors. One of the most important variables is the tuition, fees, room and board charged by specific institutions.
The actual cost of college can also include books, supplies and other living expenses. But don’t underestimate the value of scholarships, grants and work-study programs to cover the cost of college. Typically, these sources will help offset about one-third of the total cost of attending a college or university.3
However, the remainder needs to be paid through a combination of savings, current income and loans. Relying on student loans to pay for college can ultimately be more expensive when the total cost of borrowing funds is factored into the equation. Setting aside savings in advance reduces or possibly even eliminates the need to borrow.
Some parents choose to pay for all of college, allowing their child to enter the “real world” with as little financial burden as possible. Others feel that their child will have a greater chance of success if they share a vested interest by paying for a portion of college. In fact, 58% of students have a role in creating the family’s plan to pay for college, including researching financial aid.4
Your plan should be based on what works best for your family but consider making how you pay for your children’s college education a family matter. You and your children (when they reach an appropriate age) should openly discuss it and start setting goals, such as the desired schools, scholarship opportunities, and who will pay for the education and related expenses. These conversations can help your children better understand what and how they’re expected to contribute.
The best method for saving is often thought to be starting early and contributing on a monthly basis. Financial experts suggest striving for at least 70% of future college costs.
Figure out how much you can contribute to the fund monthly and re-evaluate the contribution regularly.
Understanding the features and tax benefits of college saving vehicles can help you develop an appropriate plan for your family’s situation. Savings plans can include one or more of the following:
In addition to traditional savings or loan options, the rising cost of education encourages thinking outside the box. Here are a few less traditional means of funding college.
Education saving is one of the top financial goals for any family. The sooner you start, the more likely you are to build a pool of money to help offset the significant costs of higher education.
Learn more about your options for funding an education.
Leveraging the assets in your investment portfolio through a flexible line of credit can provide quick access to cash.
Consider using leverage as part of your financial and investment strategy.