Skyrocketing college tuition costs and rising prices for higher education necessities like textbooks present a challenge for families who are trying to save enough money for their child’s college education. According to College Board’s “Trends in College Pricing 2015,” the published tuition and fee price of a full-time year at a public four-year institution is 40% higher in 2016 than it was a decade ago (after adjusting for inflation), while public two-year schools came in 29% higher and private nonprofit four-year schools were 26% higher than 10 years ago.
As a parent, you may be struggling to find the balance between appropriately saving for your child’s academic future and ensuring you’re saving enough for your own retirement.
How can you make sure your child has the opportunity to pursue higher education when the time comes without being burdened with astronomical debt?
1. Start Early – The most important factor in saving for college is time. Begin saving as early as possible to allow time for your investments to grow.
2. Set a Goal and Timeline – Meet with your financial advisor to determine a college savings goal and timeline and to choose the best type of college savings account for you.
3. Automate Savings – Consider setting up monthly direct deposits into the account to put your saving on autopilot. Automatic deposits make it easy and lessen the likelihood that you’ll skip or forget to make a contribution.
4. Look for Tax Breaks – When considering what type of savings plan to utilize for your child’s higher education, be sure you meet with your financial planner and tax advisor so you understand and pay attention to the tax implications. For example, 529 education savings plans are college savings accounts that are exempt from federal taxes. Similarly, when your child starts college, make sure you understand the qualifications for any tax credits, such as the American Opportunity Credit.
5. Get Family (& Friends) Involved – Are Grandpa and Grandma always asking what your child would like for Christmas or do friends insist on bringing a birthday gift to the party? Consider suggesting they skip the toys and instead contribute whatever money that would have spent on presents to your child’s college fund. While this can be delicate and isn’t for everyone, there are plenty of creative resources that make it easy and a little less awkward.
With the proper planning, an early start and a schedule of consistent contributions, you can help set your child up for a bright future and ensure their hardest decision when it comes to higher education is what school they want to attend.
401K Plan Administrator