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Philly.com: When should I start saving for college for my kids?

Sep 5, 2017

college_kids

Children cost money, that’s not really up for debate. According the Department of Agriculture, it costs $233,610 to raise a child. If that number isn’t daunting enough, there’s also a college education looming over a parent’s head.

Everyone knows that college costs, and student loan debt, are at the forefront of many financial conversations. According to studentloanhero.com. the average Class of 2016 graduate has $37,172 in student loan debt, up six percent from 2015. That’s enough to make even the most financially stable parents lip quiver.

Parents want to give their children the best education possible, but it doesn’t come cheap. So many people ask, when should I start saving for my child’s education? The answer is not pinpoint, but there are key pieces of advice to follow. Hoping for a large scholarship for your child, while tempting, is not one of them.

The earlier you start saving for college, the better – but don’t let that deter you if you’re a little late to the game,” Erin Ellis, financial educator at Philadelphia Federal Credit Union, said. “Whether you start saving for college when your child is born, or you wait to put some money away until they’re nearing college-age, the important part is that you save something.”

Saving, whether it’s far in advance of a cash out date or not, comes with a lot of questions. What accounts are best for these types of things? How much should I be putting in? Ellis says one of the best options is a 529 plan, with the option of a guaranteed savings plan.

“ Say the current cost of a college course is $600, and you open a guaranteed savings plan with that money when your child is born. Fast-forward 18 years later when your child is ready to go to college, perhaps that same course costs $1,200. Because you invested the money in a guaranteed-savings 529 for that college course, you are guaranteed to have the funds to pay for the adjusted cost of the course,” Ellis explained.

There are also other ways to save, such as an Education Savings Account (ESA), which takes advantage of tax-free interest up to $2,000 per child per year. Regardless of how you save, Ellis says it is never too late to start putting money away for your child’s education.

“A lot of parents think it’s too late to save if their child is already in high school, but there is always some value – even if the money won’t cover tuition, a few dollars can go a long way toward expenses like books and supplies,” Ellis said.
She believes you should make it very known to your child that you are saving for their education.

“There’s a lot of power that goes behind telling your child that you’re actively investing in their future because it reinforces the importance of education as they grow,” Ellis said.

So whether you just had a child or have one in high school, it is never too early or too late to start saving for college. Even if your children don’t appreciate it now, they will in the near future.

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