There is no magic wand or one-size-fits-all plan to save for college. Some parents choose to start saving for college the day their children are born while others don’t start saving or have the luxury to do so until much later in life.
As you can imagine, multiple factors impact how much and when parents start saving for college. Some of these factors include how many children they have, what school they choose to attend and how much time they have to save. These all play vital roles in deciding how much to save each month to help fund your child’s college education.
The 4K Rule
Education planning is one of the more difficult expenses to plan for as there are so many unknown factors. A common rule of thumb to help parents save for college is the 4K Rule. The 4K Rule suggests multiplying your child’s age by $4,000 and that’s the dollar amount you should have saved for that child. One sizeable issue with this rule is that it was designed to determine the amount you would need to save to cover the tuition for a public instate university.
So what happens if your child decides to venture out of state or wants to attend a private university? What tools are available to save for that? A 529 plan is a common investment tool to assist in saving for higher education.
A 529 plan is an investment tool that allows you to save money for college through tax-free growth. The distributions are also tax exempt if used to pay for education expenses. A 529 plan is simple to open and many employers have begun offering 529 plans as part of their employee benefits package. If you’re interested in opening a 529 plan, speak to a financial advisor today.
Other Ways to Save
Parents and students alike are improvising to pay for college. Some parents are encouraging their children to graduate early as an attempt to save money or attend a community college (which come at a much cheaper cost than a four-year university) before heading off to the university of their choice.
In addition, it is becoming more and more prevalent for students to get on campus jobs to help offset their college tuition costs. Another solution parents and students alike have opted for is living at home to eliminate the cost of on campus housing. Although these efforts may not be huge, every little bit helps. Just like savings efforts. (For related reading, see: Best Part-Time Jobs for College Students.)
Consistency Is Key
As with every investing strategy and financial plan, consistency is key to your college savings plan. The more consistent you are with your investing the better returns you will have down the road. Your consistency shouldn’t stop with investing – remember to frequently check in on your savings plan to revaluate and keep it up to date. If you don’t, you may miss out on an opportunity to save more as financial circumstances are ever changing.