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College Saving

Core Facts

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Friday, November 19, 2021

Saving for college is not as easy as it appears. Being able to set money aside for your kids to attend school isn’t as simple as just setting up a savings account and putting any extra cash left over at the end of the month into it. You can’t use a piggy bank mentality to pay for it. That approach doesn’t take into account unexpected expenses, recessions, or loss of income. Any disruption or change can have a big effect on your financial plans. It makes it difficult to predict the future and that can have disastrous consequences.

Prices go up, that is a certainty. But to work out exactly how much they increase can be a guessing game especially when large-scale shifts occur in the economic landscape. Making sure that there is enough set aside to pay for tuition and any other costs that are associated with college take careful and meticulous planning. [1] College Board data shows us that from 1976 to 2018 college costs shot up about 6.0 percent. Compare that to the Consumer Price Index which measures consumer inflation and we see that CPI over the same time-averaged only 3.7 percent. This means that college costs are rising faster than inflation. 

Scott Mass, Senior Vice President of David Lerner Associates says, “An important aspect of financial planning for college is making sure that you have your goals set accurately. Talking to a professional and figuring out your personal roadmap is the first step to college saving.” 

Income-oriented strategies and budgeting are the foundation of saving for college. Risky investments are not a good idea, you need to have a safe middle ground of investing that over time helps you reach your financial goals.

[2] You will need to shell out around $60,000 annually to attend a respected private college in the United States today. However, college costs will keep rising so you can’t budget for 60k when it comes time for your kids to go to college. Saving that amount will get you somewhere but it won't get your kid to the college you were originally budgeting for and that could mean loans and debt or just disappointed faces. Smart analysts have worked out that if the current trend continues at the same pace of inflation, college will cost more than $100,000 per year by 2030. To save that much a parent of a 3-year-old in 2021 will need to save $1300 a month until they are 18. 

Get professional advice and work out a plan to save what you will actually need when the time comes. College saving is not the same for everyone. Do your math and add the cost of inflation so you don’t have any surprises down the line.


Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC

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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 800-367-3000 Visit our website: www.davidlerner.com

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