It Is Never Too Early to Save for College
It is no secret that college costs have been rising much more quickly than general inflation. Many parents and would be parents, however, do not realize just how expensive higher education has become. In 2002, the average price of a four year education at a private university was a staggering $110,000. Based on only average inflation rates, that same education in 2020 would cost over $216,000. With college costs rising more than inflation, chances are the true cost will be even greater.
These rising costs have led to an ever increasing demand for a limited amount of financial aid, and this makes it more important than ever before to start saving for college early. It is no wonder that so many parents start saving for college as soon as the baby is born.
Saving for college all begins with setting a goal. It is important to create an estimate of how much money you think you will need. After you have that figure in mind, you can start planning for how to achieve that goal.
After you have created your goal and started planning, it is time to start to get your finances together. It is important to remember that saving for college is not a goal in itself. Rather it should be part of your overall financial goal. It is therefore important to look at the big picture and to be sure that your financial life is in order. This means reviewing your life insurance, your retirement plan, your investments, and even your will.
With the cost of higher education so high, it is important to explore all the options. There are many ways to fund education expenses, including Coverdell Savings Accounts (formerly known as Education IRAs), custodial accounts, 529 plans and a number of other investment options such as mutual funds, stocks, bonds and savings accounts. There are advantages to all these approaches, and it is important to explore all the options to determine the combination that works best for you.
It is important as well to consider the effects of your savings plan on taxes and financial aid eligibility. Some vehicles for saving for college are subject to taxation, while others are not. In addition, some of these accounts will have an impact on eligibility for financial aid, while others will have no such affect. It is important to seek out the help of a professional when making these investment decisions.