Being able to send your child to college is near the top of the wish list for most parents. A college education often, but not always, can open doors to many opportunities and is increasingly necessary in today's economy. But that diploma sure isn’t free (most of the time). Unless you are very well off financially, it's difficult to sit on the sidelines for years and then suddenly find the money to pay for college when your child is ready to go. The best thing to do is to start saving as early as possible, even if you're able to save only a small amount at first.
How am I going to help pay for my child’s education?
Year after year, thousands of students graduate from college. So how do they do it? Many parents save less than 100 percent of their child's education costs before college. Typically, they put aside enough money to make a down payment on the college bill. Then, at college time, parents can supplement this down payment with:
• Current income
• Federal PLUS Loan
• Private loans (e.g., home equity loan, margin loan)
• Investments (e.g., mutual funds, 401(k) plan, IRA, cash value life insurance)
• Federal and college student-based financial aid (e.g., student loans, grants, scholarships, work-study)
• Child's savings, investments, and/or earnings from a part-time job
• Gifts from grandparents
How much is enough?
You'll want to put aside as much money as possible in your child's college fund, but not to disadvantage your retirement plan. The more money you put aside now, the less you or your child will need to borrow later. Start by estimating your child's costs for four years of college. Then decide how much of the bill you want to fund--100 percent, 75 percent, 50 percent, and so on. We usually advise our clients to have the children put some skin in the game.
If you are a client of ours, we can offer you tools to help you plan, along with out help. Click here to view a video.
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