One day you’re bringing your new little bundle of joy home from the hospital, and (what seems like) the next day they’re off to kindergarten. Imagine how quickly the day will come when they are ready for college? The bigger question is: will you be?
Even though it may not seem it, eighteen years goes by very fast. Since it won’t be long until your baby is heading to college, it’s important that you start saving for that time now. In fact, if you haven’t started planning, preparing, and saving by the time your child enters kindergarten, you might even have some catching up to do.
Each year, the cost of college tuition is rising. According to CollegeBoard, for 2018-2019, the average tuition at a public university cost $26,290, and $35,830 at a private university. When families look at these figures, they should keep in mind that they only include tuition and fees, and not additional costs such as housing, food, books, transportation, and fees associated with extracurricular activities.
So, how can families start preparing for the financial costs of college? Before you can truly prepare for your child’s education costs, you should first have your own solid, financial plan and make sure your goals are prioritized, so you know the exact steps you’ll need to take to reach them. Once you have established your financial plan, the next important step is to do your research. Families need to understand what the costs are and their options, and then they need to determine what works best for their budget and finances.
Researching different college costs and programs that are available is an important step to saving. This will not only give you a better idea of what you may be paying, but also how to best save. For example, depending on the college your child attends, you could be paying in-state rates (lower tuition costs for residents) vs. out-of-state rates (higher tuition costs for non-residents). Some schools offer a prepaid tuition program called, Section 529 plans which freeze the current rates to allow you to pay off the tuition as it currently stands.
Another key to saving is to be realistic in your planning. The Federal Student Aid Office of the U.S. Department of Education suggests that families be realistic and consistent when it comes to saving for college. Families do not need to put away a large amount of money at one time in order to save quite a bit of money over time. An example they provide is: if a family saves $14 a week into an account that earns at minimum 1% interest, that account will accumulate more than $13,000 after 17 years. Even though the amount you save may not cover the total cost of college, it can help families lower the amount of student loans they may need.
How is your family preparing for college?