Saving for College
Being able to afford to send your children to the college of their choice, without being limited by cost, can be one of the greatest satisfactions of being a parent.
Over the past decade, the cost of getting a college degree has increased about 6 percent per year on average. If this trend continues, and all indications are that it will, the cost for a year of college will double in 12 years and triple in 19. (And remember, increasing numbers of students are spending more than four years in college.)
One of the keys to accumulating the money needed to send a child to college is to start saving early. Let's use an example of a 7-year-old (11 years until college) planning to attend a state university as an in-state student. The estimated total current cost of a year at a state university is about $16,000. Assuming costs increase 6 percent annually, the first year will cost more than $30,000. To save for all costs in advance of attending four years at a state college, the student needs to have accumulated more than $132,000.
Assume the funds being saved earn 5 percent. If the student’s parents had started saving when the child was four, they would have needed to save about $897 per month. If they start when their child is seven years old, their monthly savings need to be $977. If they wait until age 10, they will need to save $1,136 per month. If they wait until 13, they will need to save more than $1,535 per month.
Starting to save early not only enables spreading saving over a longer period, but also provides the benefit of the earnings on the funds over a longer period of time. Talk to your financial advisor about the best savings programs for your situation. But don't wait. The sooner you start saving, the more you'll save.
This content has been provided by ClickRSVP and is intended to serve as a general guideline.