Top 5 Tips for Building a College Savings Plan
Higher education can open doors to many career opportunities. However, paying for college is a major financial challenge for many American families. Having a College savings plan is crucial in helping families prepare for this expense. It’s one of the biggest savings goals, second only to retirement.
“Planning for college can feel overwhelming, but taking strategic steps early on can make a significant difference. Whether you’re a high school student aiming to save for your college fund (great job!) or looking to support a young kids’ education, starting a college savings plan now is a smart move,” advises David Beckerman, Senior Vice President, Investments at David Lerner Associates, Inc.
How Much Should You Save?
The amount you need to save for college varies for everyone. Your personal circumstances, goals, and resources all play a role in determining the right amount.
However, college tuition is a well-known fact that keeps rising significantly each year. According to EducationData.org, the typical annual cost of college in the U.S. (covering tuition, books, supplies, and living expenses) is $38,270 per student.
If prices increase at a rate of 5 percent annually, the total cost of four years of college attendance will be $164,948.
Here are five practical tips to help you build a robust college savings plan:
- Open a 529 Plan
One of the most effective ways to save for college is by opening a 529 plan. This tax-advantaged savings plan is designed explicitly for education expenses. Contributions grow tax-free, and withdrawals for qualified education costs are also tax-free. Additionally, many states offer tax deductions or credits for contributions to a 529 plan, making it a compelling option for savvy savers. - Set Realistic Goals
Setting clear and achievable savings goals is crucial. Start by estimating the total cost of college, considering tuition, fees, room & board, and other expenses. Then, break down this amount into manageable monthly or annual savings targets. Remember, every little bit helps, and it’s better to start small than not at all. Adjust your goals as needed, and stay committed to reaching them. - Automate Contributions
Consistency is key to building a substantial college savings fund. Automating your contributions ensures you stay on track without remembering monthly deposits. Decide how much you can contribute monthly and set up automatic transfers from your checking account to your 529 plan or savings account. Every little bit counts. This “set it and forget it” approach helps you stay disciplined and makes saving a seamless part of your financial routine. - Utilize Gifts and Bonuses
Use financial gifts, tax refunds, or work bonuses to boost your college savings. Instead of spending extra money, allocate it to your college fund. This can significantly accelerate your savings and help you reach your goals faster. Encourage friends and family to contribute to the 529 plan for birthdays or holidays instead of traditional gifts. - Explore Scholarships and Grants
While saving is essential, pay attention to the free potential of scholarships and grants. Excel academically, participate in extracurricular activities, and apply for many scholarships. Grants and scholarships can reduce the amount needed from savings and minimize future student loan debt. Start researching options early to maximize opportunities.
Conclusion
Building a college savings plan requires dedication and smart strategies. You can make significant strides toward funding a college education by opening a 529 plan, setting realistic, automating contributions, utilizing gifts, and exploring scholarships. Remember, every step you take today brings you closer to a financially secure future.
Start your college savings journey today with David Lerner Associates. Our experts are here to guide you through the process and help you make informed decisions. Contact us to learn more about our investment opportunities and how we can assist you in achieving your financial goals. Secure your child’s future with a well-planned college savings strategy.
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.