Laurie Haelen, AIF®
Senior Vice President - Manager of Investment and Financial Planning Solutions
[email protected]941.366.7222 x41970
Sending a child to college is at the top
of the wish list for many parents. A
college education can open doors to
many opportunities and help your child
compete in today's competitive job
market. But, the cost of college has risen
exponentially over the years and getting
started on saving can be a daunting task.
For the 2021-2022 school year, the
average annual cost is: $27,330 for a four-year
public college (in-state student),
$44,150 for a four-year public college
(out-of-state student), and $55,800 for a
four-year private college. Total figures
include tuition and fees, room and board,
books, transportation, and personal
expenses. Costs for the most selective
private colleges are substantially higher.
(Source: College Board, Trends in College
Pricing and Student Aid 2021)
It's likely that costs will continue to rise,
but by how much? Annual increases
in the range of 3% to 5% would be in
keeping with historical trends, but it is
not possible to predict if those trends
will continue. Therefore, it is important
to start planning as early as possible to
have adequate time to accumulate the
funds required.
Year after year, thousands of students
graduate from college. So how do they
do it? Many parents are unable to save
100% of their child's education costs
before their kids are ready for college.
In many cases, they put aside enough
money to make a down payment on the
college bill (in the same way you might
purchase a home). Then, at college time,
parents supplement this down payment
with:
- Current income
- Federal and college student-based
financial aid (e.g., student loans,
grants, scholarships, work-study)
- Investments (e.g., 529 plan, mutual
funds)
- Child's savings and/or earnings from
a part-time job
- Federal Parent PLUS Loan
- Home equity loan or other private
loan
- Gifts from grandparents or other
family members
You'll want to save as much money as
you can in your child's college fund and a
529 plan is a popular and flexible option
to use. The more money you set aside
now, the less you or your child will need
to borrow later. Start by estimating your
child's costs for four years of college.
Then use a financial calculator to
determine how much money you'll need
to put aside each month or year to meet
your goal. In many cases, the amount of
money you set aside really comes down
to how much you can afford to save.
You'll need to take a detailed look at
your finances, as every family's situation
is different.
Perhaps the most difficult time to start
a college savings program is when your
child is young. New parents face many
financial demands that always seem to
take over — the possible loss of one
income, child-related spending, the
competing need to save for a house or
car, or the demands of your own student
loans. Yet this is the time when you
should start saving.
When your child is young, you have
time to select investments that have
the potential to outpace college cost
increases (though investments that offer
higher potential returns may involve
greater risk of loss).
You'll also benefit from compounding,
which is the process of earning
additional returns on the interest and/or
capital gains that you reinvest along the
way. With regular investments spread
over many years, you may be surprised
at how much you might be able to
accumulate in your college fund.
Don't worry if you can't save hundreds
of dollars every month right from the
beginning. Start with a small amount
and add to it whenever you can. If
it seems overwhelming to start the
process, a professional advisor (such
as a CERTIFIED FINANCIAL PLANNER™
Professional) can assist you in setting
goals and staying on track. Please reach
out to us if you need assistance getting
started and we will be happy to help.
©2022 Broadridge Investor Communication Solutions, Inc.
All rights reserved. This material provided by Laurie Haelen.
This material is provided for general information purposes only. Past performance is not indicative of future investment results. Any investment involves potential risk, including potential loss of capital. Before making any investment decision, please consult your legal, tax and financial advisors. Non-deposit investment products are not bank deposits and are not insured or guaranteed by Canandaigua National Bank & Trust or its affiliates, or any federal or state government or agency and are subject to investment risks, including possible loss of principal amount invested.