How Do I Start Saving for College?
Planning for the future is always important, particularly for the parents of a young child. Higher education can open doors to many opportunities and help your child succeed in a competitive job market. The costs are high, so planning and saving for money to pay for it should start as soon as possible.
For the 2020-2021 school year, the average cost of one year at a four-year public college for in-state students is $26,820, while the average cost for one year at a four-year private college is $54,880.*
Keeping in mind that those costs could rise, here are a few recommendations to help fit your child’s higher education into your financial plan.
When should I start saving?
Perhaps the most difficult time to start saving for college is when your child is young. New parents face many financial demands that always seem to take over: a possible loss of income if one parent chooses to stay home, child-related spending, the competing need to save for other big-ticket items or even your own student loans. Regardless, this is the time to start saving.
When your child is young, you have time to select investments that have the potential to outpace college cost increases. You'll also benefit from compounding, which is the process of earning additional returns on the interest and/or capital gains that you reinvest along the way. With regular investments spread over many years, you may be surprised at how much you can accumulate in your child’s college fund.
How will I pay for it?
Whether you obtain a loan, qualify for federal aid or fund everything out of your own pocket after years of saving and investing, there are many different ways to foot the higher education bill. Consider a 529 savings plan, a popular way to save for higher-education expenses. A 529 plan is a tax-advantaged college savings vehicle that has no age restrictions and no income phaseout limits — and you can use it to pay for more than just tuition. You may find that a 529 plan makes saving for college much easier.
How much should I save?
You'll want to save as much money as you can in your child's college fund. The more money you set aside now, the less you or your child will need to borrow later. Start by estimating your child's costs for four years of college. Then use a financial calculator to determine how much money you'll need to put aside each month or year to meet your goal.
If you aren’t sure how to fit saving for college into your financial plan, we can help. An RBFCU Investments financial professional can discuss options and help you find a way to save that fits your needs and budget. To schedule a no-cost, no-obligation consultation, please call 1-888-294-0202 or email email@example.com today.
*Total figures include tuition and fees, room and board, books, transportation and personal expenses (Source: The College Board's Trends in College Pricing Report 2021).
Article prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2021; May 2021
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