According to some calculations, the cost of a private college education starting in the year 2029 is expected to be roughly over $100,000 per year. However old your child is (or even if you are planning on having a child in the near future), now is the time to start saving. Whether you start saving before your child is born or when your child turns 10, the savings can add up to more than you think.
Important Things to Consider:
1. Check Out Your State’s 529 Plan
You can usually save up to $200,000 per plan, and withdrawals for education expenses are tax-free. Plus, there are no age restrictions or income limitations. To learn more, consult a financial advisor, or go online to your state’s 529 website.
2. Open a Savings Account for Your Child
Not only does it give them a place to save the money they earn or receive as gifts, it makes them an active participant in growing their own savings, which teaches them good financial habits.
3. Use Retirement Funds As a Last Resort
From scholarships and grants to a variety of student loans – your children will have more sources of college money than you have for your retirement.
4. Adjust Your Investments as Needed
When your money is invested in a professionally managed fund, like a 529 Plan, you can typically change your fund allocation at any time. For instance, when you first start saving, or if the market is recovering, you may want to put more of your savings into stocks. But as your child gets older, or if the market falls, you may want to choose a more conservative option
5. You Don’t Have to Save the Entire Cost of College
While you should start to save as much as you can, set a goal for yourself to save for at least a third of your child’s expected college costs. To pay for the remaining expenses, use a third of your current income and cover the remaining third with federal and private loans, scholarships and grants.
Always consult a qualified professional or tax advisor.
The College Board
US Department of Education National Center for Education Statistics