While it is important to try to be present in the moment when your children are little (they really do grow up so fast), it is also vital to look towards the future. A huge part of ensuring that they get the best possible start in life is to take action to cover the cost of college education should they decide to pursue their studies further following their high school graduation.
The reality is that a college education is far from cheap. By starting to save up now, you can save your children from being lumbered with the burden of having to take out a hefty student loan and incur debt from such a young age. Here is how to go about it.
How much does college cost in the United States?
The cost of tuition varies greatly depending on whether your child opts to study at a public two-year university or a private four-year college. In-state and out-of-state fees also vary drastically when it comes to the latter. According to statistics released by Top Universities, you are looking at an average cost of $12,320 at a public college, $10,230 per year at a private in-state college, and $26,290 per year at a private out-of-state-college. All of these estimations factor in both tuition and room and board-related expenses.
Furthermore, you also need to take into account that what college fees look like today will not be the same as what they will look like in 10 or 15 years from now when it is time for your kids to enroll. In an effort to give you an idea of what to expect, the cost of tertiary education has risen by over 25% in the last 10 years, according to a report by CNBC.
The bottom line? It pays to be prepared!
What is the best way to save up for college?
There are many different ways to create a college fund for your children. However, most financial experts agree that the easiest and most cost-effective way in which to go about it is to look into 529 plans. These 529 savings plans operate as simple savings accounts with the difference that you choose how to invest your money and any contributions that you make are done with money that has already been taxed. As your investment increases, you do not have to worry about any further tax contributions or any expenses when you decide to withdraw the cash in the future – as long as the money isused to pay for costs related to tertiary education.
Another notable benefit of choosing 529 plans to save for your children’s college education is that 34 states, including the District of Columbia, now offer state tax benefits when you contribute money into the accounts.
If you are considering going the 529 savings plan route, be sure to find a trustworthy financial partner to help guide you through the process to make saving simpler and to help ensure that you get the most out of it.