Earlier this month, Forbes.com named Sarah Lawrence College in New York the most expensive school in America with tuition, room and board adding up to over $57,000 per year. Wait, let me get my calculator… $228,000 for a four-year education! Yikes! Okay, I know, that’s one end of the spectrum, BUT make no mistake, tuition, room and board, fees, books, personal expenses and travel to and from can easily be $50,000 per year for a student attending a private college. How do you get to $200,000 of college savings by the time your child is 18? $500 per month for 18 years straight (assuming a 7% annual return). That’s like an extra car payment each month without the car.
Many of us do not start saving for college on day one. We have mortgages, car payments, new furniture… lots of other obligations when the baby is born. No matter how old your child is, it’s never too late to start. And despite whatever gloom and doom you hear about with the stock market or the economy, there is no such thing as a bad time to start. Just do it!
There are many calculators on the web to figure out how much to save for college. The calculator at http://www.savingforcollege.com/college-savings-calculator/ is really easy to use.
Once you figure out how much you need to invest, the next step is choosing how to invest. I really like the 529 plans because of the tax benefits and the ease of use. One of the big advantages with the 529 plans are the investment choices. If you don’t want to be the investment manager, worrying day in and day out about the underlying investments, then you can choose an age based fund. The Fund Manager manages the fund based on the child’s age (or the expected year they will start college). So, if the target age is for a child 5 or under, the Fund Manager will invest with more aggressive investments. If the child is older, and closer to starting college, the Fund Manager will invest with more conservative investments. The beauty of the age based funds is that the manager re-allocates the fund each year into more conservative investments as the child gets closer to starting college. And, since their expertise is in investments, they decide when to make the strategic moves.
You can always use TripleTheGift to get started with your child’s college savings or to supplement what you already have. Everyone can use a little extra. Or what about for a new baby? If your girlfriend is having her third child and really doesn’t need the furnishings and accessories, think about how much she would appreciate a nice amount to start off that college savings account. How about high school graduation? Just because they are going off to college in a few months doesn’t mean they wouldn’t benefit from some additional savings. Remember, there are four or more years of tuition payments and letting money grow for a couple of years in a savings account is bound to help. It’s like when you find a $20 bill in the winter coat you haven’t worn in a year; it feels good!