Planning College Costs as Newlyweds
As young couples embark on the journey of marriage, many financial decisions must be made. One of them is funding higher education for future children. With the right strategies, newlyweds can proactively approach college savings, setting their families up for long-term success.
What are the emerging trends and common challenges newlywed couples face when affording college? Let’s also explore practical tips to help maximize their financial preparedness.
One of the key trends impacting college affordability is the rising cost of tuition, fees, and living expenses. Over the last two decades, tuition and fees at private national universities have jumped by about 126 percent, putting a significant strain on family budgets! This reality has led many young couples to re-evaluate their financial priorities and explore creative ways to build college funds.
Another emerging trend in college and education savings is the growing popularity of alternative financing options, such as 529 and tuition payment plans. These tools can help newlyweds spread out the cost of college over time, allowing them to save and budget more effectively. According to a recent survey, 68 percent of parents now use 529 plans to save for their children’s education.
Despite these innovative solutions, many newlyweds still face common challenges regarding college savings. One of the biggest hurdles is balancing competing financial goals, such as paying off student loans, building emergency savings, and saving for retirement. This delicate juggling act can make it difficult for young couples to dedicate sufficient resources to college funds.
Another challenge is the uncertainty surrounding future college costs.
According to Michael Norton Senior Vice President at David Lerner Associates, “With tuition rates continuing to rise rapidly, it can be challenging for newlyweds to accurately project the college savings and education expenses they’ll need to cover, making it harder to develop a targeted savings plan. Working with an experienced investment counselor can make the task easier.”
Additionally, the COVID-19 pandemic has introduced new variables, such as the potential for remote learning and changing financial aid policies, that can further complicate college planning for young couples.
To help overcome these obstacles, here are some practical tips for newlywed couples looking to maximize their financial literacy and prepare for the costs of higher education:
- Start Saving Early: The sooner young couples can begin contributing to college savings, the more time their money has to grow through the power of compound interest.
- Leverage Tax-Advantaged Accounts: Programs like 529 plans and Coverdell Education Savings Accounts offer valuable tax benefits that can help stretch college savings further. Newlyweds should research these options and incorporate them into their overall financial plan.
- Prioritize Budgeting and Debt Management: By maintaining a detailed budget, tracking expenses, and strategically paying down debts, young couples can free up more funds to dedicate to college savings. Tools like budgeting apps and debt consolidation can be invaluable in this process.
- Explore Scholarships and Financial Aid: Newlyweds should encourage their future children to start researching scholarship opportunities and understand the financial aid application process as early as possible. This can help offset the rising costs of tuition and reduce the need for student loans.
- Communicate and Collaborate: Open and honest discussions about college savings, financial goals, and risk tolerance are crucial for newlywed couples. By aligning their priorities and working together, partners can develop a cohesive strategy that benefits the entire family.
- Stay Flexible and Adaptable: Given the rapidly changing landscape of higher education, newlyweds should be prepared to review and adjust their college savings plan regularly. Monitoring economic trends, changes in financial aid policies, and emerging educational alternatives can help young couples stay ahead of the curve.
By implementing these strategies and continuously building their financial literacy, newlywed couples can confidently navigate the challenges of college affordability and set their children up for academic success.
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. 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.