Are you a new parent? If so, then much congratulations to you! Raising a child helps bring purpose to an adult’s life. It’s rewarding yet trying, fun and challenging. It’s also expensive – and it’s getting more expensive by the day.
Yes, there are the medical bills associated with the labor and delivery of the child (not to mention prenatal care). Then there’s also the pediatrician appointments in its first year of life, diapers, formula, clothes, nursery furniture, more diapers, etc. The list goes on and on – and that’s just the short-term expenses. There’s also the long-term expenses that parents must account for. You know, things like your child’s future college education.
It’s no secret that college is very expensive these days, and tuition costs are seemingly increasing by considerable single-digit percentages every year. In fact, the average cost for a four-year public university today is about $101,000. The average cost for a student to currently attend a four-year private university is about $167,000.
Buckle up for this one: According to estimates, the cost for college 18 years from now – you know, when your newborn child is 18 and ready to go off to school – is expected to be $184,000 for four years at a public university, and more than $300,000 for four years at a private institution. Unless you’re going to bank on your kid getting a full-ride scholarship or expect them to be paying off student loans for the rest of their lives, they’re going to need some help.
Start saving now, new parents. Here’s how:
Now that we’ve gotten the projected costs for college tuition in 2036 out of the way, let’s slow things down a little and get our bearings. Yes, college is wicked expensive now and just going to get more costly moving forward. But knowing what to expect can also help you properly prepare for what’s to come.
It’s always great to set aside a certain amount of money from each of your paychecks that will go toward future college tuition, but let’s face it, you just had a new kid. Chances are any disposable income that made this possible is going to the likes of diapers, formula and other newborn necessities. That said, there are a bevy of good options that can help you stomach those tuition costs when they come around in the not-too-distant future. Here’s a look at some of them:
529 Plan:
Most financial experts agree that 529 plans are the best way to save for your child’s college costs. These plans offer some terrific tax benefits. In fact, depending on the state that you live in, you can expect either a full or partial state income tax benefit with these plans. It’s important to note that there are different types of 529 plans, and it’s important to choose the one that you’re most comfortable with. For instance, some plans are designed to be more aggressive early in the child’s life and then transition to more conservative investing as the child nears their first day of college. Just make sure that you’re comfortable with how it’s being managed. It’s also important to decide between the prepaid college tuition 529 option or the college savings plan one. The former purchases credits in the present for future tuition costs while the latter is essentially an investment account.
Savings Bonds:
Investing in savings bonds can put a nice dent in college costs. The only catch is that for some savings bonds, they must be left to mature for 20 years in order to double the value of what they were originally purchased for. EE savings bonds are ideal for college expenses. They can make great gifts for your child during special occasions, like baptisms, first communions, birthdays and more.
Home Equity Loans:
OK, so this isn’t exactly a college savings plan, but it can help you manage any college costs that you didn’t save for. Think of this as more of an emergency option, as you’ll still be paying back your home equity loan with interest.
College isn’t getting any cheaper. So what’s your plan when it’s time for your kids to go off to university?
Regards,
Ethan Warrick
Editor
Wealth Authority
