The U.S. Department of Agriculture estimates the cost of raising a child to 17 for a middle-income family is about $285,000.
When To Start Saving
If you plan on sending your child to college, the price for a four-year in-state university will be an additional $107,280.
Here are some strategies to help you prepare for the cost of higher education.
The “when” to start saving for college is simple: the earlier, the better. The sooner you start saving, the easier it will be to make it a regular part of your budget, and the more time you give your money the potential to grow. If you put $100 a month toward your child’s college education, after 17 years, you would have saved $20,400. But that same $100 a month would be worth over $32,000 if it had generated a hypothetical 5-percent annual rate of return.
How To Start Saving
The “how” to pay for college has several options that you should acquaint yourself with early, especially if you are trying to save for college expenses without taking student loans. It can feel daunting because you have many competing demands for money when it comes to your kids, such as braces, piano lessons, sports, summer camp, and more. You may feel like saving for college is a pipe dream, but this is where doing your homework comes into play.
- Financial Aid – To be considered for any financial aid, all students should complete the Federal Application for Federal Student Aid (FAFSA). FAFSA then determines if you are eligible for financial aid options, including Pell Grants.
- Scholarships – There are many scholarship opportunities available based on a variety of factors, including academics, athletics, culture, location, accomplishments, and areas of study. High school students should check with their guidance counselors for a list of scholarships and also research other options online.
- Tax-advantaged college savings programs – Many federal and state-sponsored programs are available, such as 529 plans. The income grows tax-deferred as you will not pay federal or state taxes on contributions, and distributions from a 529 are not federally taxed.
- Prepaid tuition plans – Many states offer prepaid tuition plans where you can prepay tuition at today’s rates at eligible public and private colleges or universities. And many private colleges and universities now also offer prepaid tuition plans for their institutions.
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The rate of return on investments will vary over time, particularly for longer-term investments. Investments that offer the potential for higher returns also carry a higher degree of risk. Actual results will fluctuate. Past performance does not guarantee future results. 2 The tax implications of education savings programs can vary significantly from state to state, and some plans may provide advantages and benefits exclusively for their residents. Please consult legal or tax professionals for specific information regarding your individual situation. Withdrawals from tax-advantaged education savings programs that are not used for education are subject to ordinary income taxes and may be subject to penalties. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2023FMG Suite. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Past performance is no guarantee of future results. Securities offered through Securities America. Member FINRA/SIPC. Insurance products offered through Securities America or its licensed affiliates. Not NCUA Insured. No Credit Union Guarantee. May Lose Value. First Entertainment Credit Union and First Entertainment Investment Services are not registered brokers/dealers and are not affiliated with Securities America. Securities America Advisors do not offer tax advice. Please consult a tax professional.