As your kids grow older, the thought of college tuition and expenses comes closer to the forefront of your mind. With each passing year, college gets more and more expensive. Since the price of college keeps increasing, it is difficult to estimate how much you need to save up for your child’s higher education. Continue reading to know if you will have enough money to send your kid to college.
The average cost of tuition and fees for the 2020-2021 school year was $41,411 for a private college, $11,171 for in-state residents at public institutions, and $26,809 for out-of-state residents at public institutions. Costs vary from college to college. This is also only the estimate for tuition and fees, which does not include room and board, books, supplies, and other living expenses. How much you need to save for your child’s college fund depends on how much you are willing to cover.
To decide how much you need to save, you must start with a savings goal. Decide between you and your spouse how much you are willing to contribute to your child’s education expenses. A rule of thumb is to estimate the full cost of attendance for your child and aim to save one third. The other two thirds could be covered by scholarships, financial aid, and income at the time the child is pursuing higher education.
Instead of using a regular savings account, consider investing in a 529 college savings plan. A 529 plan is a tax-advantaged investment account for parents to save for their children’s education. This plan offers tax free growth and tax-free withdrawals. 529 plans are passively invested, adjusting portfolios that start with high growth investments and lowers as your child nears going off to college. Starting a 529 for your child will reduce the amount you have to save and allows growth on your savings to receive a great return on investment.
Committing to a monthly contribution amount will ensure that your child’s educations savings will grow. Especially with a 529, continuous and consistent contributions assists in the growth of the account. The earlier you start saving, the more money that is saved up for your child’s education.
Working with a financial advisor on the best options for saving for your child’s college is the best decision you can make. Your financial advisor will be able to give you a proper estimate on exactly how much you should aim to save. Your advisor will also be able to work specifically with your financial standing to having a savings plan that works best for you. Contact me for more information at 402-454-7204 or by email at email@example.com to see how I can help you save for your child’s education.