Cramming for College Costs
Effective Planning Can Help You Pass This Critical test
The thought of saving for college crosses almost every parents mind, sometimes even before their child is born. Yet, for various reasons, a college savings fund often does not become a reality until many years later, if ever.
Whether or not you start saving for your childs education early on, the cost of that college education will continue to increase and, most likely, more than double from the time a child takes her first step to the day she starts her freshman year.
Few would dispute the value of a college education. Aside from the personal and intellectual growth, the financial reward is undeniable. In the U.S., four-year college degree graduates earn, on average, 62% more than those with only a high-school diploma. Those with a masters degree earn almost twice as much, and those with professional degrees, over three times as much as high-school graduates. Over a lifetime, the gap in earnings between those with a high school diploma and those with an undergraduate degree or higher exceeds $1 million.
Still, the price of a degree could jolt almost anyones budget. During the five-year period ending in 2007, the nations average public and private college costs rose by 31% and 41%, respectively.
When on-campus housing, books, supplies, transportation, and other personal costs are factored in, the average cost to attend a public four-year university or college for one year is $17,336, and $35,374 at a private institution.
If that isnt enough to make you want to start saving today, consider this: students are taking an average of more than six years in public four-year colleges and more than five years in private four-year colleges to earn a bachelors degree. If these trends continue, most parents who plan to help fund their childrens education cant afford to put off saving for it.
Reducing Sticker Shock
To help you determine how much money you will need to pay for an education once your child reaches college age, there are a number of online calculators, such as those found at www.finaid.org, www.collegeboard.com, or www.nmfn.com. Unless your children are elementary school age or younger, involve them in the process to determine if they:
It is never too early to begin saving for college. A great place to start includes any of the most popular plans used today, such as Section 529 plans, Coverdell Education Savings Accounts (ESAs), custodial accounts, and life insurance. In addition to the possible benefits of compounding, these plans may also provide great tax advantages.
Better Late Than Never
Now matter how late in the education savings game you get started, if, after factoring in the amount you already have saved, you still fall short, various options may be available, including:
Above all, dont be afraid to ask for advice when planning your childs education, regardless of how late you might be starting this process. Financially, emotionally, and psychologically, it is probably one of the biggest investments you will ever make.
And the impact on your childs future will last a lifetime.
John Joyce is a financial representative with Northwestern Mutual Financial Network, the networking name for the sales and distribution arm of the Northwestern Mutual Life Insurance Co.; (413) 748-6000.