Financing your child’s university or college education is not easy but will work if you prepare early enough using a combination of savings and special investments. Figures from the National Center for Education Statistics indicate that the average cost of undergraduate studies per annum at a public institution (inclusive of tuition fees, board, and lodging) is at $16,757 and at a private not-for-profit institution, at $43,065. It is never too late to put away money for later use and there are many resources that you can tap to augment funds when the time comes for your child to pursue higher education.
Value of Education
Every parent dreams of sending their kid through university and while every child might not intend to pursue a degree, there is no legacy more valuable and priceless than education. The future of generations lies on educated and empowered citizens. Education offers your kids endless possibilities, opening their minds, encouraging liberal thinking and making room for innovation that will help economies improve standards of living. However, education is not cheap and comes at a price. Education charities by Jason Sugarman, foundation grants, and private scholarships are some sources of monetary assistance for college. But, a substantial part of funds comes from your own good financial planning.
Ways to Plan for College
According to Statista, there are currently 22.4 million students enrolled in US public and private education institutions in 2016/2017. If you start early enough, there are several ways that can be used to fund at least half of your little one’s education. Fidelity Investments recommend that you put multiply your kid’s age by $2,000 and put away this amount. By the time your child reaches 18 years, you would have $36,000, a decent amount that will be able to partially cover education fees.
The next question is where will you put this money? A 529 plan is highly recommended because this is state-sponsored and provides tax advantages. You can withdraw money from these plans for education-related expenses such as tuition, books and the like. The only catch is that it comes with a 10% penalty if you use it for other purposes that are not education-related.
Don’t be tempted to set-up a ROTH IRA which although is investment flexible (you can withdraw funds any time) is not tax-free. A trust fund for your kid will also be slapped by enormous taxes that will take a huge chunk off that fund to the taxman. Hence, your best bet is to use college funds that are tax-free yet interest bearing.
The bottom line is, there is no substitute for early planning, saving and investment when it comes to gifting your child with an education. For those who could not put away money or did not think early enough, don’t lose heart. There are still many ways to snag funds for college such as grants, scholarships, in-state support, loans and so on. The 2017 Sallie Mae Report indicated that 35% of college costs are covered by grants and scholarships, 23% from parents, 11% from student income and savings and 19% from borrowing. What is important is that your child wants to go to college and are determined to find ways to support themselves. If the motivation is there, the financial obstruction is only secondary for them and for you because you will both will find a way.