How many of you are like me and know a lot of mothers and fathers? I’ll be honest and say that I feel a little old knowing that all of my college friends have to schedule time with me around time with their kids but that’s a fact of life as we get older. I can remember back when we were all younger and our only care in the world was which flavor of wings to get.
I also have some friends who have reached middle age and the familiar conversations of, “I don’t know how I’m going to pay for my child’s college” are starting to resonate in the workplace. When I look at friends my age who have young kids and my older friends with college age children, the obvious sentiment is being heard loud and clear: Start saving for college as early as possible.
The great thing about this problem is that many states now offer programs to assist in this. First, I want to direct you to a fabulous website. Go to http://www.savingforcollege.com/ and you will find a wealth of information as you look at the best ways to begin saving. One of my favorite tools on this site is the college cost calculator. I entered my child’s age as 4 and it said that once he is college age, I will need $247,265 for his education! Further, it tells me that we will need $698 of contributions to a college savings account per month to meet this obligation. (Can 4 year olds get part time jobs?)
You need to learn about this number: 529. Go on the hunt for a 529 plan. These are offered by many states as a way to assist you in your college saving endeavor. The best thing about them is that they are free of federal taxes. If you were to start a brokerage account and try to make that money in the stock market, for example, you would pay capital gains taxes on the money. With a 529 plan, you pay no federal taxes when it’s time to withdrawal the money. Some states will give you tax breaks as well. This is the single best way to save. If you know that you’re going back to college in the future, you can also start a fund for yourself.
You may have heard that states are having problems funding these 529 plans. That is true at this time. I can’t guarantee that we won’t see these plans change in some way but your money is safe so don’t worry about that.
The earlier you start saving for your child’s college, the less of a burden it will be on you. Your child may be so smart that they get a full scholarship. They may be so athletic that they skip college all together and end up supporting you. Of course the odds aren’t in your favor with that one. Chances are, no matter what your situation, you are going to be paying for some portion of your child’s education so start now. If you live in Ohio, you can read about their plan by going to http://www.collegeadvantage.com/.
Other states have similar websites. A quick Google search will pull them right up.