We all want to provide a bright future for our children, and part of that means saving for their college education.
Students in the class of 2015 graduated with an average of a little more than $35,000 in college-related debt.* That’s not the legacy we want to leave for our children. As the challenges and costs of paying for higher education continue to grow, saving now is more important than ever, and can have a big impact later. One way to face the challenging costs of college head-on is to open a 529 college savings plan. A 529 plan is a tax-advantaged investment plan designed to encourage saving for the future higher education expenses of a designated beneficiary (typically one’s child or grandchild). A 529 plan is quick and easy to set up and can help you realistically meet your college savings goals this school year—and beyond. With more than 12 million 529 plan accounts open nationally, 529 plans continue to be one of the most successful ways for families of all income levels to plan ahead, save for college and reduce reliance on student loans.
Committing to a college savings plan may seem overwhelming at first, but the investment is worth it. Statistics show children with a college savings account are six to seven times more likely to attend a four-year college, compared to children with no dedicated account. College graduates earn an average of $1 million more than high school graduates during their careers, according to the U.S. Census Bureau. Plus, a recent study by Georgetown University’s Center on Education and the Workforce reported that by 2020, more than 65% of new jobs in the U.S. will require a college education.
How can you jumpstart your college savings?
Define your savings goals:
The first step is to determine how much you ultimately want to save for your child’s education. Do you want to save for tuition only or to include room and board? All four years of college or just two? Public or private? You can use a college cost calculator to forecast what the estimated cost of college will be when your child is ready to enroll.
Start early and save often:
Start saving as early as possible – you can even open an account before you have children. The earlier you begin saving, the more time your money has to grow, and you can always increase your contributions to an account in the future. It’s never too late to start saving. Remember, saving something is always better than nothing. Think of it this way: a family that begins setting aside $50 a month when their child is born can accrue over $21,000 in an account that earns 7% interest per year, by the time the child turns 18. This is just one example of how a little bit goes a long way in helping to eliminate future debt.
Find Your Fit:
Nearly every state offers a 529 plan, either a prepaid tuition plan and/or a savings plan. Many plans offer tax or other incentives for residents, so it’s always a good idea to look at your state’s plan first. For example, Texas offers several different 529 plans, including the Texas Tuition Promise Fund, Texas College Savings Plan, and the LoneStar 529 Plan. However, you don’t have to go with your state’s plan if it isn’t the right fit for you. In fact, you can participate in almost any 529 plan across the country. CSPN’s website is an excellent resource for choosing a 529 plan that best meets your saving goals and needs. You have the option of comparing 529 plans by feature and by state.
As mothers we do everything we can to ensure the best lives for our children. Investing in a 529 plan is an important stepping stone in supporting our kids’ higher education and their futures beyond school. Remember: no amount saved is too small, and it is never too early or too late to start saving!
I’ll be speaking at MomCom 2015 on November 7 and look forward to answering your questions in person!
Learn more and register for MomCom 2015 at MomComLife.com.
*The Wall Street Journal, May 2015