School supplies and clothes have been purchased, open houses have been attended, school pictures taken and the fall events are in full swing! While you may be catching your breath, especially after cramming all the summertime activities you could come up with into the short summer we get here in the upper mid-west, it is not time to forget about college!
Time with your kids goes by in the blink of an eye. So, whether you are preparing to send your child to kindergarten or are dealing with teenagers, it’s never too early (or too late) to start planning for their higher education. Not sure where to start? We’ve put together a list of some key concepts that you, as parents should consider when it comes to college planning.
#1 Just Say NO! to Procrastinating
Raising the kiddos is not for the weak of heart. There is so much to think about and do as they’re growing up that college might not always be at the forefront of your mind. But we know, the earlier you get started on planning how to fund your child’s education, the better off you and your children will be. With the impact of compounding interest, even just a couple of years can make a difference in your savings. Take the first step by calculating the potential future cost and consider how many years you have left to save. This way, you’ll have a specific number in mind when it comes to putting money aside each month.
#2 Do the Research
The homework isn’t JUST for your kids. The good news is that there are many different options when it comes to saving for your kid’s education. However, choosing the right savings account can be overwhelming. By taking some time to research the types of accounts that can be used to pay educational expenses you will find that there are many options that will address all sorts of scenarios and meet yours, and your child’s needs down the road.
- 529 plans
- Coverdell ESAs
- Roth IRAs
Options could include:
Consider how they differ and what aspects are most valuable to you. You’ll also want to consider factors such as your risk tolerance and how much time you have left to save.
#3 Investments with High Annual Fees
Yep, they are out there and you probably don’t want to have to think about additional fees when you’re trying to save for a huge expense such as college. However, excessive fees can make it much more difficult to reach your college planning goals. When choosing an investment vehicle or savings account for college, review any potential fees that could negate or diminish earnings.
#4 Retirement Funds to Pay for College
Some folks will deplete their retirement savings in order to send their child to school. This is a significant misstep that some people make. While you think that you are taking one for the team, it’s important to think ahead, because restarting retirement savings when you are in your 40s and 50s will make it difficult to retire when you want to. Better ideas are considering student loans, scholarships, 529 plans, and other college savings programs.
#5 Dismissing Student Loans
Student loans sometimes get a bad rap. It’s important to know that taking out student loans does not mean that you don’t make enough money. College is getting increasingly more expensive every year, and there’s no shame in taking out a loan for a little help. In fact, when it comes to federal student loans there are about 42.9 million borrowers each year. You can research different federal student loan programs by talking with your high school guidance office and the university/college of interest to learn about to understand the difference between subsidized and unsubsidized loans to determine if taking out a loan would work for your unique situation.
Even if you don’t plan on borrowing money, there is no harm in filling out the FAFSA as you prepare for your child heads off to school. It’s a quick and easy (and FREE “Free Application for Federal Student Aid”) way to potentially receive aid, and you don’t have to take it even if it’s offered to you and your college student. Additionally, we recommend that you research loan types, as federal loans may offer lower interest rates than private lenders - but this may not always be the case.
Still stressed out by the thought of starting your college planning journey? Use these tips as a jumping-off point as you work with your financial advisor to develop a college savings strategy for your future graduate.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.