Why Invest in College Savings?

The graduating class of 2017 is now preparing to accept diplomas and throw their caps up in celebration. Education is a gift that keeps on giving. And that’s not just something that sounds nice to say. Let’s look at the statistics. College grads out-earn people without degrees consistently and by a decent margin. On average, a holder of a bachelor’s degree earned a starting salary of $45,500 compared with the average high school graduate who earns $28,000 per year.

Over time that earning disparity has actually grown. So one of the top reasons to invest in college is the long term earning potential. And over 80% of graduates say that college was worth it or has paid off.

But how to pay for college? And who can benefit from this investment?

529 plans are an excellent way to save for higher education. They have great tax benefits and don’t compromise the student’s ability to qualify for financial aid (since the investment is made in the parents’ names).

If grandparents are doing the investing, contributions qualify for the $14,000 annual gift tax exclusion. If you start early enough and make it an annual affair, where instead of gifts for certain holidays or birthdays, family members may contribute to the 529 plan.

A debt-free college degree is a truly wonderful gift. And besides the parents or family members who can enjoy ancillary benefits from this investment, the people who benefit from these plans the most are the students themselves, obviously. Keeping your child out of a bottomless pit of student loans is probably the best thing you could do for their finances.

Student loan debt in the United States now exceeds $1 trillion with 39% of Millennials reporting that being worried about money and their financial future is a weekly concern.

IMPORTANT DISCLOSURES

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