Is anything more important than planning for our children’s future? While many will agree with this sentiment, most people still don’t have a savings plan that is solely dedicated to their children’s education.
Much like creating a last will and testament, the stumbling block for most people is simply getting started. “What are my options… where do I go?”
Plan For Education Now
Getting started is the hardest part but as with many things in life, just thinking about it is not taking action. If you want to think about education planning, sit down with a pen and paper and consider the cost of future education for your child.
The annual price of tuition in 2012 was over $15,000. Thinking of a private school? That runs an average higher than $35,000. There’s currently a proposal to raise the interest on future student loans, as well. With interest and inflation, your child’s college eduction could easily cost you, or your child, well over $100,000 on graduating. Your child needs your help now.
Planning for children’s education is most effective when utilizing government created programs that are specific to college expense preparation.
The 529 Plan is a specialized savings plan that will allow you to put aside money from your paycheck. Every state has their own version of a 529 plan, and all have their own unique advantages. While 529 plans typically aren’t tax deductible on your federal tax return (and the contributions are after taxes on your paycheck), the investment you set aside is tax deferred. Not paying income tax on this amount for 18 years is gold. This means you’re paying tomorrow’s education with the value of a dollar today. That adds up to enormous savings.
How much can you help your child pay for a college education? By contributing $200 a month into a 529 account, at an average return of 6% over the next 18 years, you would accumulate $97,800 vs. $77,000 in a taxable savings account.
Even if you can’t pay the entire bill, the college loans will be minimal and repayment quick.
Getting college paid for is the kind of help that is going to allow your child to get the most out of life and start a family debt-free. Priceless.