With student debt growing 56 percent over the past ten years, saving for college has never been more important.
One way to face the challenging costs of college head-on is to open a 529 college savings plan. A 529 plan is a tax-advantaged investment plan designed to encourage saving for the future higher education expenses of a designated beneficiary (typically one’s child or grandchild). Investing in a 529 is a quick, easy tool to realistically meet your college savings goals this year—and beyond. With more than 12.3 million 529 plan accounts open nationally, 529 plans continue to be one of the most compelling ways for families of all income levels to plan ahead, save for college, and reduce their reliance on student loans.
Committing to a college savings plan may seem overwhelming at first, but if you are in need of some inspiration to start, consider this: children with a college savings account are six times more likely to attend a four-year college, compared to children with no dedicated account. In addition, college graduates earn an average of $1 million more than high school graduates during their careers, according to the U.S. Census Bureau. In addition, a recent study by Georgetown University’s Center on Education and the workforce reported that by 2020, more than 65% of new jobs in our country will require a college education.
The College Savings Plans Network (CSPN)—the nation’s leading objective source about Section 529 College Savings and Prepaid Tuition Plans—strives to educate people on the benefits of 529 plans, and why they are necessary for our children’s future. Here are some saving tips from CSPN to help you jumpstart your college savings plan and ensure it is financially fit for 2015 and beyond:
Define your savings goals: The first step is to determine how much you ultimately want to save for your child’s education. Do you want to save for tuition only or include room and board? All four years of college or just two? Public or private? You can use a college cost calculator to forecast what the estimated cost of college will be when your child is ready to enroll.
Start early and save often: Start saving as early as possible – you can even open an account before you have children. The earlier you begin saving, the more time your money has to grow, and you can always increase your contributions to an account in the future. Just like exercise, it’s never too late to start saving. Remember, saving something is always better than nothing. Think of it this way, a family that begins setting aside $50 a month when their child is born can accrue over $21,000, in an account that earns 7% interest per year, by the time the child turns 18. In this case you can see that a little bit goes a long way in helping to eliminate future debt.
A recent nationwide 529 investor survey conducted by CSPN confirmed that investors are choosing to start early. According to the results, 31 percent of investors opened a 529 account for a beneficiary aged one or younger. In addition, the average age of a first beneficiary is five years, while the average age of a second beneficiary is four years, suggesting that investors begin saving earlier when opening a second 529 account.
Find Your Fit: Nearly every state offers a 529 plan, either a prepaid tuition plan, and/or a savings plan. Many plans offer tax or other incentives for residents, so it’s always a good idea to look at your state’s plan first. However, you don’t have to go with your state’s plan if it isn’t the right fit for you. In fact, you can participate in almost any 529 plan across the country. CSPN’s website is an excellent resource for choosing a 529 plan that best meets your saving goals/needs. You have the option of comparing 529 plans by feature and by state.
For more information on how to start saving for college, or to spread the word on 529 plans to friends and family, visit CSPN’s website: CollegeSavings.org.
About Today’s Guest Author:
Betty Lochner is currently Chair of the Executive Board of the College Savings Plans Network (CSPN), a national non-profit association and is the leading objective source of information about Section 529 College Savings Plans and Prepaid Tuition Plans. Lochner also serves as director of Washington’s Guaranteed Education Tuition (GET) program, a division of the Washington Student Achievement Council.