Most American families would love to send their kids to college and afford them greater opportunities in life, with a degree and higher education under their belts. But unless you plan ahead, it’s likely that you will be part of the majority of American families who do not have a college savings plan in place. According to a Sallie Mae study, only 39% percent of families have a plan to pay for college tuition. That means that the remaining 61% of families are left having to take out loans to cover the costs.
Whether the reasons for not saving are that the family is afraid of not qualifying for financial aid, that they simply don’t have the income to support a savings plan, or that they just aren’t informed of all their options, the bottom line is that it’s better to be over-prepared than under-prepared. The point to keep in mind is that college should not come as a surprise when your teen graduates high school, but the statistics would seem to indicate that it often does.
On average, families pay for college through a combination of resources: savings, grants, scholarships, student loans, or personal loans. A 529 College Savings plan may be the most intelligent thing you could do in anticipation of the coming expenditure for tuition and other costs that go along with a college education.
Something to keep in mind is that you can view your savings as an investment in your child’s future. The New York Times released a study that showed Americans with a four-year college degree earned 98% more per hour than workers without degrees.
In order to be ready when that day comes, it would be wise to start preparing today. Find a good college savings calculator, so you can start to bridge the gap between the money you currently have and the money you’ll need.
It’s also important to note that you shouldn’t sacrifice your retirement savings to pay into the college fund. You can always take out a loan for college, but you can’t always take out a loan to fund your retirement. Speaking of loans, it’s always better to take a federal student loan before a private student loan. It would also be wise to think in these terms: only borrow as much as your college student is expected to earn in their first working year.
No matter how you approach it, planning ahead with enough time to effectively set aside enough money for college will reduce stress and boost your financial well-being overall.
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