It’s no secret that the cost of sending just one child to college for four years can be staggering – tuition and fee hikes regularly outpace inflation. Rather than sending your student into the world with a burden of studentloan or private debt, consider saving options to help cover at least a portion, if not all, of higher-education expenses.
Start saving early. It’s common to assume that saving will be easier in the future when you’re earning more, but as your family and income grow, so do your expenses associated with your standard of living. If you wait until your student is closer to college age, you may find you’ve waited too long and may face the prospect of scaling back the family’s finances in other ways to save for hefty tuitions, fees and living expenses.
Put time on your side. When you start saving early, college savings can earn substantially more over time through the power of compounded growth. For example, suppose you start putting aside $100 for an eight-year- old child. Assuming a 5 percent annual growth rate, you’ll save $15,592 by the time your child is ready for college, but will have invested only $12,000 out-of-pocket.
If you wait until your child is 15 years old to start saving, you’ll have to put more money aside each month to save the same amount, and your out-ofpocket investment will be much greater. For example, at the same 5 percent annual growth rate, it would take $ 400 per month to save $15,556 in time for college, and you’d have invested $14,400 out-of-pocket.
Know your options. Fortunately, parents and grandparents who intend to cover or contribute to a child’s education costs have more choices today than they’ve ever had. If you’ve not yet looked into an education savings plan, Wells Fargo Advisors can help you choose among a variety of savings vehicles, including 529 plans., education savings accounts (ESAs) and custodial accounts.
This article was written by Wells Fargo Advisors and provided courtesy of Todd Alexander, The Alexander Financial Group, in McConnellsburg.
Investment products and services are offered through Wells Fargo Advisors Financial network LLC (WFAFFN), and Member SIPC. The Alexander Financial Group is a separate entity from WFAFFN.