With all the other expenses competing for your monthly income - mortgage, car payment, 401(k) plan contribution, and the like - carving out a small sum of money to save every month for college isn't easy. However, the earlier you start the more you're likely to accumulate.
Let's compare two hypothetical examples. The Smiths and Jones both want to send their children to a college whose four-year total cost is approximately $40,000. The Smiths start saving as soon as Junior is born, putting away $100 per month earning 8% per year. By the time Junior is ready for college, they will have saved $48,749 - more than enough to cover the entire cost plus account for inflation.
The Jones, however, wait until Precious is 10 years of age before starting to save. Even though they can put away $250 per month, when Precious is ready for college eight years later they have only saved $34,163 - meaning they'll have to make up any shortfalls out of pocket.
Of course, these hypothetical examples are for illustration purposes only and do not represent the return of any specific investment. Also, taxes, fees, and other costs are not considered. But the message is clear: The earlier you start, the less you'll need to save each month and the more you're likely to end up with by the time you send your child or children off to State U.
Fortunately, several savings and investment strategies exist to help you accumulate assets for college.
Create an incentive program with your child. Offer to match the money the child makes to his own account. Teach him or her to work and help contribute to their fund - they will value their education even more.
College funding takes discipline, effort, and planning. It's also becoming more complex every year. Rely on our financial planning expertise to help design a program that best fits your family's needs and situation.
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