Saving For College Education
A chance to have a college education is perhaps the best gift that parents can give to their children. Cliché as it sounds, it remains true that education provides security for one’s future for it leads to obtaining better jobs and earnings compared to those who only have high school diplomas. Studies show that college graduates tend to earn $500,000 more on average than those who are not able to finish secondary schooling.
However, costs of college education today are steadily increasing. As almost everyone wants to go to college, it is still a huge financial consideration, especially for middle-class families. Indeed, college expenses are reported to be one of the most difficult financial problems that most families in the United States have to contend with. To avoid future stress and difficulty of going into debt and bankruptcy, it is essential to start saving for college as early as possible.
Why Save For College?
Saving for your children’s college education is tantamount to protect their future. Many make the mistake of relying on bank and student loans, and even scholarship grants, instead of securing their children’s education from the onset. Clearly, this type of procrastination and ill-planning for the future has resulted in huge debts and has forced many students to drop out of their courses.
Saving for college is like planning ahead, and it is definitely more sensible than borrowing money. Although it is true that money is spent in both saving and borrowing, the major difference lies in the amount that is spent.
Consider these numbers: Try computing how much money is saved at $200 monthly with seven percent interest for 10 years versus loaning the same amount with the same interest, cost, and time span.
Even without producing an exact figure, it is evident that by saving, one is able earn interest. Whereas in borrowing, one pays for the interest. In the end, saving earns more money, while borrowing basically entails paying more than the principal debt.
General Tips For Saving
It cannot be stressed more that in any plan, time is of the essence. In saving for college, it is imperative that one begins as soon as possible. According to statistics, the college tuition of a child born today will increase by three to four times the present college costs. Thus, college costs that are planned today will no longer be sufficient in a few years.
As such, parents should begin early to offset whatever rise in matriculation that shall inevitably be faced. Saving early means that there is more time for money to grow in interest.
The best way to meet fee surprises is to create a savings plan. For instance, parents can try setting a fixed amount to be put away every month. But before doing so, parents should also try checking current college costs to be able to determine the amount saved per month.
Moreover, there are numerous websites and information desks that may be utilized to check the rate of matriculation fees. In creating a savings plan, it is also necessary to compute the return of investment that may be garnered through interest so that the growth of the money can be monitored throughout the years.
However, it is also important for parents to keep in mind that they should save within their means. Although saving a high amount every month is the best recourse, it is not necessary to sacrifice the family's basic needs. For instance, even a relatively small amount of $50 monthly from the time one child is born can result to around $20,000 in 17 years, plus investment.
Other Saving Options
As for saving college money, most states offer what is known as a 529 plan, a tax-advantaged investment program for higher learning expenses. The plans take after the section number of the Internal Revenue code from which it originated. There is much technicality and computation involved in the 529 plan. But the bottom line is that through this, states have devised a way to help parents save for the college education of their children.
Savings plans, on the other hand, entail that investments should be administered by a particular state and the growth or decline of investments are hinged on the market. At the end of the day, investing in 529 plans grants exemption from federal taxation by the moment college fees need to be paid.
As the saying goes, it's better late than never. For those who have not been able to get an early start, there is still time to begin saving. Remember that every penny saved means another penny for your child's education.