Today we want to dig into one of the most common questions our team receives:
Am I saving enough for college?
Often, we talk about how to minimize the cost of college, and many of our readers are families almost ready to pay for college. College is a few years away for them. At that point in time, we have a pretty fixed amount of money saved. We work with your resources to find a college that fits your student academically, socially, and financially while minimizing student loans.
But what if you are a parent whose children are younger? How do you know if you are saving enough to set you and your kids up for future success?
Younger parents need to hear this message!
The cost of college is rising sharply—approximately 5% per year. The reality for families is that the cost of a college education will continue to rise. It’s a simple economic principle of supply and demand — the more students who seek out higher education will continue to drive up costs, and there’s not a clear path forward to reform that would provide families relief anytime in the near term.
Procrastination can lead to a huge funding gap you must fill from some other bucket. To be clear, every family wishes they had saved more for their kid’s college education.
It’s the easiest financial thing to procrastinate on, especially when you have to save for retirement and fund travel soccer, sports, and all of the costs that come with being a family in the sandwich generation.
But the price of procrastination is high! The longer you kick the can down the road, the more you have to save month over month to pay for 100% of your child’s tuition.
The best answer?
Just start.
Even if it’s small savings at first, you’ll thank yourself later!
What can you do?
Get started. Don’t panic…it’s never too late. And it’s never too early! Start by downloading your free College Money Report™ to learn what colleges think you can afford, whether you’ll qualify for grants and scholarships, and what you can expect to pay out of pocket at different colleges and universities.
Next, start saving.
The predominant tool for college saving today is the 529 plan, and for many good reasons. These plans are easy to use and have great benefits:
- Tax-free growth
- Tax-free withdrawals for qualified education expenses
- Deduction on some state taxes
- You stay in control of the account
- Low maintenance and flexible
Again, getting started is the key. For many families, when your little one starts Kindergarten, you lose the cost of daycare. Instead of spending that money, save the money you would have spent on daycare and put it into your child’s college fund.
Still feeling nervous about getting the ball rolling? Get help! Family members, especially grandparents, may want to help.
Someday when your baby is headed off to college, you will be grateful for every penny you saved today. So take that first step!
Have questions? We’re here to help you. Reach out to us today by clicking here — it’s never too early to get your financial life organized!
Updated December 2024
